In the News

While the CFTC guidance is the first effort by a U.S. financial regulator to address voluntary carbon markets, some critics have said the agency's action would address only a small part of the global marketplace. "The guidance applies only to a tiny sliver of transactions one step removed from voluntary carbon markets' core," said Erin Shortell, climate risk legal fellow at the Institute of Policy Integrity, a nonprofit think tank at NYU Law School.

An Oct. 16 webinar from the Institute for Policy Integrity (IPI) will discuss whether skepticism of voluntary carbon markets is justified.

Additionally, in Oct. 1 comments submitted on the draft final report, the Institute for Policy Integrity (IPI) at New York University urges the SAB to advise EPA to “distinguish EJ analyses from analyses that characterize distributional effects.” A distributional analysis can provide insight into how costs and benefits may or may not be equitably distributed across populations but do not fully address EJ.

The Climate Superfund has another benefit: It is designed to protect the public from costs being passed on by Big Oil. That’s not just what lawmakers think, it’s what experts think too. According to an analysis by the Institute for Policy Integrity at NYU Law, the public would be protected from costs being passed on. And their conclusion was recently echoed the Nobel Prize-winning economist Joseph Stiglitz,by who makes the case that the Superfund Act will not raise the price of oil on consumers.

If groups do manage to show standing, Matt Lifson, an energy attorney at IPI, explained “the legal durability of regulations will depend on courts agreeing that agencies have selected the best interpretation of the law, not merely a reasonable interpretation.” But aside from interpreting statutes, “agencies will still get substantial leeway” on their expert factual and technical findings, Lifson says, “just not when it comes to interpreting the text of the statutes.” That means backers of the IRS rules will try to show that key debates -- such as what counts as a “clean” hydrogen project under the 45V credit -- are effectively technical rather than legal disputes.

However, some advocates for tougher climate policy are warning that observers should not get “too excited” about the CFTC guidance because it is relatively limited in scope. “While the guidance is a positive step towards improving voluntary carbon market integrity, it’s only a small one: The guidance is extremely limited in reach,” says a Sept. 25 post from Erin Shortell of the Institute for Policy Integrity (IPI). “The guidance applies only to a tiny sliver of transactions one step removed from voluntary carbon markets’ core.”

In other words, the CFTC designed its guidance in such a way that it cannot do anything about the underlying voluntary markets’ low-quality carbon credits, which are the most likely to be fraudulent. The guidance is “extremely limited in reach,” as Erin Shortell, a legal fellow at the nonprofit Institute for Policy Integrity, put it in a blog post.

Late last week, the Commodity Futures Trading Commission (CFTC) finalized its guidance for regulated exchanges that list derivatives products based on carbon credits. Many commentators quickly praised the guidance as improving oversight for the troubled voluntary carbon markets, which face continuing criticism over their integrity problems. In particular, many carbon credits do not represent the greenhouse gas (GHG) emissions reductions they are intended to represent. While the guidance is a positive step towards improving voluntary carbon market integrity, it’s only a small one: The guidance is extremely limited in reach.

Also on the sidelines of Climate Week, New York University’s Institute for Policy Integrity hosts a day-long event on Sept. 24 about greenhouse gas emissions accounting.

In May 2024 authors from NYU Law School’s Institute for Policy Integrity and Guarini Center on Environmental, Energy & Land Use Law wrote that the cap-and-invest program, as described so far, “is insufficient to achieve legally mandated GHG emissions reductions,” and saying there is an “urgent need for state agencies to develop complementary programs.”