The Commodity Futures Trading Commission (CFTC or Commission) announced September 10, 2025, that it is withdrawing its "Guidance Regarding the Listing of Voluntary Carbon Credit Derivative Contracts."1 The Guidance, a substantial document running 18 pages in the Federal Register, was published just last October.2 The withdrawal might be seen as a further expression of the Republican administration's efforts across multiple agencies to dismantle actions associated with the so-called environmental green agenda of the prior Democratic administration.3 Although authorized by its statute to have up to five commissioners, following recent commissioner departures, the CFTC currently has but one commissioner, its Acting Chair.
The Guidance reviewed key factors that designated contract markets (DCMs) (i.e., derivatives exchanges) should consider when determining whether to list derivatives on voluntary carbon credits (VCCs). The Guidance, although non-binding, provided something of an informal due diligence checklist of factors for evaluating whether a VCC is appropriate to underlie a listed derivatives contract. As discussed in Bracewell's prior alert, the Guidance centered on the efficacy of a VCC's accreditation and the various risks to a VCC's continued legitimacy and worth. The Guidance considered the quality and reliability of a VCC crediting program, requiring scrutiny of:
- A program's transparency;
- The quality of its assessment of "additionality" (a VCC's true capacity to reduce emissions), of the risk of a premature reversal of a VCC's emission reducing capacity, and of the number of VCCs a project will legitimately support;
- A program's governance framework and tracking mechanisms to prevent double counting of VCCs for the same project listed on multiple registries;
- A program's inspection and certification procedures; and
- A program's ongoing monitoring to assure compliance with evolving best practices.
The Guidance had its critics, as reflected by former Republican Commissioner Summer Mersinger's dissent from adoption of the Guidance, which opined that "Focusing on ESG and Net Zero in evaluating derivatives contracts is a backdoor attempt to inject and memorialize certain political ideologies into CFTC regulatory decisions."
The CFTC's notice of withdrawal did not disavow or question the merits of the Guidance. Rather, the notice declared that Guidance was of little utility, explaining that it provided "limited value to DCMs when listing VCC derivatives contracts," because it "did not create any new compliance obligations or product listing standards that resulted in the advancement of market transparency or liquidity." The CFTC declared that the Guidance placed a "disproportionate focus on a particular class of derivative contracts" and that "market transparency, expectations, fairness, and integrity" are best served by confining "the listing regulatory frameworks" to the Commission's parts 38 and 40 of its regulations.4
Since the Guidance did not create any affirmative obligations on DCMs in listing derivatives on VCCs, its withdrawal should have no substantive effect on their continued listing. Although withdrawn, the Guidance's principles nonetheless may continue to be a resource to inform the scrutiny of DCMs' due diligence and care in the listing of derivatives on VCCs.
Footnotes
1. Withdrawal of Commission Guidance, 90 Fed. Reg. 44321 (Sept. 15, 2025).
2. Commission Guidance Regarding the Listing of Voluntary Carbon Credit Derivative Contracts, 89 Fed. Reg. 83378 (Oct. 15. 2024).
3. E.g., Federal agencies freezing funding, dismantling regulations and expediting fossil fuel projects while blocking wind and solar projects and removing climate data from government websites; the United States's withdrawal again from the Paris Agreement; and the administration's reversal or abandonment of climate-related financial risk mandates and other executive orders that addressed clean energy.
4. 17 CFR parts 38 and 40.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
