{"id":111,"date":"2010-05-14T07:50:18","date_gmt":"2010-05-14T12:50:18","guid":{"rendered":"http:\/\/blogs.law.columbia.edu\/climatechange\/?p=111"},"modified":"2012-01-31T15:37:07","modified_gmt":"2012-01-31T20:37:07","slug":"comparing-market-oversight-provisions-in-kerry-lieberman-and-waxman-markey","status":"publish","type":"post","link":"https:\/\/blogs.law.columbia.edu\/climatechange\/2010\/05\/14\/comparing-market-oversight-provisions-in-kerry-lieberman-and-waxman-markey\/","title":{"rendered":"Comparing Market Oversight Provisions in Kerry-Lieberman and Waxman-Markey"},"content":{"rendered":"<div style=\"margin-top: 0px; margin-bottom: 0px;\" class=\"sharethis-inline-share-buttons\" ><\/div><p><em>by Hannah Chang<\/em><\/p>\n<p>This second blog in our series on the Kerry-Lieberman bill (KL) discusses the bill\u2019s market oversight provisions.\u00a0 Title II, Subtitle E, covering \u00a7\u00a7 2401-16 and starting on page 624 of the KL discussion draft, is entitled \u201cRegulation of Greenhouse Gas Markets.\u201d\u00a0 These provisions amend the Commodity Exchange Act (CEA) to give the Commodity Futures Trading Commission (CFTC) jurisdiction over the trading of greenhouse gas (GHG) instruments, which are defined as GHG allowances or any other type of instrument designated as GHG instruments by the Environmental Protection Agency (EPA).\u00a0 These provisions place various limits and restrictions on the GHG instrument trading market and establish procedures to enhance transparency and address fraud and manipulation.<\/p>\n<p><span style=\"text-decoration: underline\">Kerry-Lieberman<\/span><\/p>\n<p>The market for GHG instruments is restricted to trading conducted on exchange and cleared through a GHG clearing organization.\u00a0 Only compliance entities (i.e. entities subject to the cap) and regulated carbon market participants (i.e. a person other than a compliance entity, as specified by the CFTC in regulations, whose participation is necessary for market liquidity) are permitted to participate in the market (\u00a7 2408).\u00a0 Off-exchange trading of GHG futures is prohibited (\u00a72402).\u00a0 Short sale transactions are also prohibited subject to terms and conditions prescribed by the CFTC in consultation with the EPA (\u00a7 2412).<\/p>\n<p>The CFTC is required to establish registration and reporting requirements for carbon market participants and compliance entities (\u00a7 2409) and to establish rules for the registration and operation of GHG instrument trading organizations (\u00a7 2410).\u00a0 The bill also establishes \u201ccore principles\u201d for GHG instrument trading organizations, including compliance requirements, monitoring of trading, and provision of information to CFTC (\u00a7 2410).\u00a0 GHG clearing organizations are required to go through an application process that includes registration as a derivatives clearing organization pursuant to the CEA (\u00a7 2411).\u00a0 The CFTC is authorized to change, supplement, suspend, or impose requirements as necessary and in the public interest in the case of a \u201cgreenhouse gas market emergency\u201d (\u00a7 2413).<\/p>\n<p>Existing provisions of the CEA are applied to GHG instrument trading with respect to swap transactions, fraud prohibition, prohibited transactions, and manipulation prohibitions (\u00a7\u00a7 2403-2407).\u00a0 The CFTC is required to establish trading limits to prevent excessive speculation; GHG instrument trading organizations may enact more stringent limits to prevent excessive speculation (\u00a7 2404).<\/p>\n<p><span style=\"text-decoration: underline\">Comparison with Waxman-Markey<\/span><\/p>\n<p><span style=\"text-decoration: underline\"> <\/span><\/p>\n<p>These market oversight provisions are more restrictive than the oversight provisions, Title III, Subtitles D and E (beginning on page 1027) of the Waxman-Markey bill (WM), which would have given a role in carbon market oversight to both the Federal Energy Regulatory Commission (FERC) and CFTC.<\/p>\n<p>Under WM, FERC had regulatory authority over the allowance and offset markets while the CFTC was authorized to regulate the energy and carbon market derivatives.\u00a0 FERC was given authority to promulgate regulations for the allowance markets that would ensure market transparency and prohibit fraud, market manipulation, and excess speculation.\u00a0 At the same time, the Commodity Exchange Act was amended to ensure that the CFTC had greater oversight of energy commodity derivatives and credit default swaps. \u00a0WM is also unlike KL in that it does not restrict carbon market participation to compliance entities and regulated carbon market participants.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>by Hannah Chang This second blog in our series on the Kerry-Lieberman bill (KL) discusses the bill\u2019s market oversight provisions.\u00a0 Title II, Subtitle E, covering \u00a7\u00a7 2401-16 and starting on page 624 of the KL discussion draft, is entitled \u201cRegulation of Greenhouse Gas Markets.\u201d\u00a0 These provisions amend the Commodity Exchange Act (CEA) to give the [&hellip;]<\/p>\n","protected":false},"author":330,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[642],"tags":[9424],"class_list":{"0":"post-111","1":"post","2":"type-post","3":"status-publish","4":"format-standard","6":"category-congress","7":"tag-congress","8":"czr-hentry"},"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.3 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>Comparing Market Oversight Provisions in Kerry-Lieberman and Waxman-Markey - Climate Law Blog<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, 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