The International Swaps and Derivatives Association (ISDA) has published a new industry document on trading Verified Carbon Credits (VCC).
Linklaters acted as a drafting advisor for the definition as part of a broader effort to support the transition to a green economy.
It aims to achieve this by developing strong legal and risk management standards for markets related to environmental, social and governance (ESG) activities.
of 2022 ISDA Verified Carbon Credit Trading Definition Also, associated template confirmations for spot, forward, and option contracts have been developed to support the trading of carbon credits across carbon standards and registries.
These documents are designed to allow parties to accept a broad pool of VCCs for distribution and to specify specific attributes that VCCs must meet. For example, linked to a specific registry or project.
Scott O’Malia, CEO of ISDA, said of the definition:
“Voluntary carbon markets can help direct significant funding to support green infrastructure, technology and other initiatives.”
According to ISDA General Counsel Catherine Tu Dallas, it is important for market participants to have confidence that the carbon credits they trade are tied to genuine and verifiable offset projects. The industry needs robust, standardized documentation that brings greater legal certainty and consistency to VCC transactions.
Deepak Sitlani, Derivatives Partner at Linklaters, added: Standardized documentation is a key step in the continued transition to a low-carbon economy. ”
The definition follows ISDA’s white papers published in December 2021 and November 2022, which includes information from Linklaters and addresses key legal issues related to voluntary carbon markets. and considers recommended steps to increase legal certainty.
