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New IOSCO report: Sound and Well-Functioning Compliance Carbon Markets

Last Monday July 17, IOSCO published a report to help develop sound and well-functioning compliance carbon markets. IOSCO is an association of organizations that regulate over 95% of the world's securities and futures markets in some 130 jurisdictions.

The report, “builds from the experiences of more advanced jurisdictions and gives other jurisdictions a solid starting point to avoid repeating past mistakes”, said Rodrigo Buenaventura, Chair of the IOSCO Sustainable Finance Taskforce.

"Compliance Carbon Markets (CCMs), or Emissions Trading Systems (ETS) markets, fall under two broad categories. The first and most widely used ... called “cap-and-trade”... carbon emission allowances for domestic firms and sectors are issued by governmental organizations. These allowances mandate the maximum amount of CO2 that holders are permitted to emit. Each allowance ... one ton of a pollutant such as CO2. These may be subsequently traded in a secondary market... In the second type of compliance carbon market, called the “baseline-and-credit system”, there is no fixed limit on emissions but carbon emitters that reduce their emissions ... can earn allowances that they can sell to others who need them". Refer to the Executive Summary for the full text.

And here the recommendations for "relevant authorities" to embed in their CCMs:

  1. predictability and transparency

  2. greater reliance on auctions over free allocation

  3. transparent, consistent and frequent auctions

  4. stability mechanisms and market intervention means, when relevant

  5. broad participation in primary markets, beyond compliance entities

  6. legal and regulatory clarity

  7. scrutiny of auction performances

  8. market surveillance

  9. regulate relevant market infrastructures, such as platforms and registries

  10. standardized derivatives contracts

  11. public disclosures of aggregate positions and regulatory data

  12. defined responsibilities and cooperation, including with environmental and financial agencies

Click here for the media release. And at the image below to read the 59-pages report.

About the image, it was choosen as IOSCO's report also indicates that "various jurisdictions have established compliance carbon markets since 2005", i.e during the last 18+ years. The image is a print from 15 December 2004 from our Carbon Credit Markets website. At that time, focus was on the Kyoto Protocol, the UNFCCC and CDM. Our first post was linked to an 06 December 2004 article from Agência Estado "Brazil launches its carbon credit market". Things developed differently. On the other hand, at the end of the article, there is reference to the beginning of the EU ETS. Zoom in to see for youself. Pure digital archeology. And a perspective of the CCMs developments.


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“Nothing in life is to be feared, it is only to be understood. Now is the time to understand more, so that we may fear less.”

“I am among those who think that science has great beauty”

Madame Marie Curie (1867 - 1934) Chemist & physicist. French, born Polish.

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