On June 20, the Commodity Futures Trading Commission’s (CFTC) Whistleblower Office issued an alert that individuals can become eligible for financial awards and certain protections by “blowing the whistle” and identifying potential fraud or market manipulation in the carbon markets.
Although carbon offsets are expected to continue to play an important role in the energy transition and in companies’ ability to meet their net-zero commitments, concerns have been raised on the integrity, validity and quality of carbon offsets that are transacted in the voluntary carbon markets. This whistleblower alert is the CFTC’s latest affirmative step towards overseeing the voluntary carbon markets and exercising its enforcement authority over carbon offsets.
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The CFTC is tasked with promoting the integrity and resilience of the US derivatives markets, but it also has anti-fraud and anti-manipulation enforcement authority over both the derivatives markets and the underlying spot market. The Commodity Exchange Act prohibits manipulation and fraud in connection with any swap, or a contract of sale of any commodity in interstate commerce, or for future delivery. Carbon offsets are the underlying commodity for futures contracts that are listed on CFTC designated contract markets, which brings carbon offsets and the voluntary carbon markets within the CFTC’s oversight authority.
The CFTC’s Whistleblower Program, which was created...
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