ISDA publishes standards for verified carbon credits
13 December 2022 US
Image: khunkorn/stock.adobe.com
The International Swaps and Derivatives Association (ISDA) has published new industry documentation for the trading of verified carbon credits (VCCs).
Linklaters acted as drafting counsel for the definitions, which come as part of a broad effort to support the transition to a green economy.
It aims to achieve this by developing robust legal and risk management standards for markets related to environmental, social and governance (ESG) activities.
The 2022 ISDA Verified Carbon Credit Transactions Definitions and related template confirmations for spot, forward and options contracts have been developed to support trading of carbon credits across carbon standards and registries.
The documents have been designed to allow parties to accept a wide pool of VCCs for delivery or to specify particular attributes the VCCs must satisfy — for example, being linked to a particular registry or project.
Commenting on the definitions, ISDA CEO Scott O’Malia says: “To transition to a more sustainable economy, we need to mobilise trillions of dollars of private sector investment to implement cleaner energy and transport solutions and build more energy efficient buildings.
“The voluntary carbon market will help channel the critical financing to support green infrastructure, technologies and other initiatives.”
It is critical that market participants have confidence that the carbon credits they trade are associated with genuine, verifiable offsetting projects, according to ISDA’s general counsel Katherine Tew Darras. The industry needs robust, standardised documentation which will bring greater legal certainty and consistency to VCC trading.
Deepak Sitlani, derivatives partner at Linklaters, adds: “We were pleased to work with ISDA as drafting counsel for the definitions. Standardised documentation is a significant step in the continued transition to a low carbon economy.”
The definitions follow the publication of ISDA whitepapers in December 2021 and November 2022, which included input from Linklaters, that explored the key legal issues associated with the voluntary carbon market and recommended steps to create greater legal certainty.
Linklaters acted as drafting counsel for the definitions, which come as part of a broad effort to support the transition to a green economy.
It aims to achieve this by developing robust legal and risk management standards for markets related to environmental, social and governance (ESG) activities.
The 2022 ISDA Verified Carbon Credit Transactions Definitions and related template confirmations for spot, forward and options contracts have been developed to support trading of carbon credits across carbon standards and registries.
The documents have been designed to allow parties to accept a wide pool of VCCs for delivery or to specify particular attributes the VCCs must satisfy — for example, being linked to a particular registry or project.
Commenting on the definitions, ISDA CEO Scott O’Malia says: “To transition to a more sustainable economy, we need to mobilise trillions of dollars of private sector investment to implement cleaner energy and transport solutions and build more energy efficient buildings.
“The voluntary carbon market will help channel the critical financing to support green infrastructure, technologies and other initiatives.”
It is critical that market participants have confidence that the carbon credits they trade are associated with genuine, verifiable offsetting projects, according to ISDA’s general counsel Katherine Tew Darras. The industry needs robust, standardised documentation which will bring greater legal certainty and consistency to VCC trading.
Deepak Sitlani, derivatives partner at Linklaters, adds: “We were pleased to work with ISDA as drafting counsel for the definitions. Standardised documentation is a significant step in the continued transition to a low carbon economy.”
The definitions follow the publication of ISDA whitepapers in December 2021 and November 2022, which included input from Linklaters, that explored the key legal issues associated with the voluntary carbon market and recommended steps to create greater legal certainty.
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