LONDON: A global securities watchdog proposed 21 safety measures on Sunday to improve integrity, transparency and enforcement in voluntary carbon markets (VCMs) in a sector of growing importance to efforts to combat climate change.

IOSCO, which groups market watchdogs from Asia, Europe, Latin America and the United States, launched a 90-day public consultation on a set of good practices for national regulators to apply.

“VCMs have gained significant importance in recent years. But for these markets to succeed, they need integrity – both environmental and financial,” Rodrigo Buenaventura, chair of IOSCO’s sustainable finance taskforce, told an event at the COP28 climate summit in Dubai on Sunday.

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The two weeks of UN talks, which began on Nov. 30, are addressing debate over whether ending the use of fossil fuels in the first place should be prioritised over promoting technologies that can capture emissions.

VCMs cover pollution-reducing projects, such as reforestation, renewable energy, biogas and solar power, that generate carbon credits companies buy to offset their emissions and meet net-zero targets.

Banks, investment funds and speculators also buy credits in the hope of re-selling them at a higher price, IOSCO said.

IOSCO last year raised the prospect of closer scrutiny of carbon markets when it said it was concerned the quality and double counting of credits left the sector open to fraud.

IOSCO, whose members commit to applying agreed rules, seeks to standardise terminology in VCMs, a sector that Morgan Stanley bank expects to grow from $2 billion in 2020 to about $250 billion by 2050.

National regulators could require companies to disclose their use of carbon credits, and platforms that trade credits to have better anti-fraud and market manipulation safeguards, IOSCO said.

VCMs are separate from government-regulated carbon markets, such as the emissions trading scheme in the European Union, the world’s largest.

Good practice could include “comprehensive disclosures on the project development process, verification and auditing methodologies, and the entities responsible for measurement, reporting, and verification,” IOSCO said.