On June 29, the Commodity Futures Trading Commission (CFTC) established two new task forces. One task force will address cybersecurity issues, while the other will focus on environmental fraud and misconduct. A July 12 Sidley memo discusses the task forces and their respective aims.
The memo breaks down the role of the Environmental Fraud Task Force and its focus on carbon markets specifically. The CFTC believes there is an increased risk of fraud and manipulation in arising voluntary carbon markets and plans to focus its efforts on fraudulent statements about the environmental benefits of purchasing carbon credits. In addition to the CFTC’s interest in voluntary carbon markets, the agency’s new task force will also examine other forms of greenwashing and misrepresentation surrounding ESG investment strategies.
The CFTC’s attention to carbon markets brings enhanced scrutiny to a largely unregulated industry. Ultimately more regulation may result in higher-quality credits being available. This may also serve to protect the government’s investments in carbon capture and storage projects present in the Inflation Reduction Act by ensuring that market participants can back up their claims. However, companies that participate in the voluntary carbon market should review their current holdings and assess the quality of any carbon credits they have purchased. This is especially true for companies making environmental claims based on their purchase of carbon credits.