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Carbon Pricing Sits High on US Regulator’s Agenda

CFTC Commissioner Insists US Takes Climate Change Seriously.

US Commodity Futures Trading Commission (CFTC) commissioner Rostin Behnam said yesterday that putting a price on carbon is critical to efforts by investors and the financial markets to tackle climate change.

“If we create the right incentives, which includes a price on carbon, we can use the power of the financial market and institutional investors to allocate assets and capital in the right direction, such that we can address climate change and mitigate the risk,” he said in a keynote speech at a webinar, titled ‘The Rise of the Green Economy’, held jointly by the London Stock Exchange Group and Principles for Responsible Investment.

Behnam’s comments follow the publication of a report. ‘Managing Climate Risk in the US Financial System’, by the CFTC’s climate-related market risk sub-committee, earlier this month. The report makes a number of recommendations aimed at improving the resilience of the US financial system to the impacts of climate change.

Behnam’s speech explained both the CFTC’s process and recommendations. To come up with policy recommendations that would be both effective and easily implemented in order to mitigate climate risks, Behnam formed a committee consisting of experts from various fields from all over the US, asking them to take a holistic review of financial markets, given their interconnectedness. The report makes 53 policy recommendations, including putting a price on carbon.

“I started to put together the puzzles of the relationship between climate change and financial markets, and the risk climate change poses to financial markets, and what we could do as a financial markets ecosystem to address those risks and build a better, stronger economy,” Behnam said.

Other policy recommendations include disclosures, stress testing under different climate scenarios, governance decisions at the board level and international alignment.

The report, he believes, can be seen as both a risk document, one that poses the risks that we face, and also as an opportunity – to reshape the economy, use the power of financial markets allocating capital to transition to a net zero economy, and to use the power of these markets for the better.

“With this report, I’m hopeful in sending a message to the international community that there are folks in the US who care deeply about these issues, both in the public and private sector. And hopefully, we are going to start engaging with the international community and all the work that is being done overseas. I think this is a great effort from a US perspective,” he concluded.

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