The CFTC Carbon Credit Probe: Legacy Credits Under Scrutiny

At a Glance · Where Things Stand

Climate Decode reads the CFTC inquiry as enforcement against fraud rather than a new set of quality rules. The CFTC withdrew its guidance on what makes a sound credit in September 2025, and its return a year later as an enforcer shows that the US intends to police the market through penalties after the event.

Liability can reach anyone who passes on false data with reckless disregard, not only the developer who created it, so registries, verifiers and rating firms now have to stand behind what they publish. The two categories reported to be under examination are at different stages, since REDD+ has rebuilt its baselines through VM0048 and jurisdictional programmes while orphan-well crediting has not yet been through that reset.

Climate Decode therefore expects the gap between credits with a documented basis and credits without one to widen. Credits with a CCP label, an independent rating, Article 6 authorisation or measured outcomes should hold their value, while legacy REDD+ and orphan-well credits are likely to be repriced, and a buyer’s due diligence record becomes part of the value of each credit.

The Commodity Futures Trading Commission (CFTC) has not announced an investigation of the voluntary carbon market, and no complaint, order or subpoena had been made public by 11 October 2026. The public record consists of a Bloomberg report of 15 September 2026, based on one person familiar with the matter, and remarks by the CFTC’s Director of Enforcement, David Miller, the following day.¹

According to Bloomberg, investigators have sent voluntary document requests to major US carbon registries, to validation and verification bodies (VVBs) and to independent rating firms. The requests reportedly concern credits from plugging orphaned oil and gas wells and from reducing emissions from deforestation and forest degradation (REDD+), and draw on leads received under previous administrations.

Miller said at a conference in New York on 16 September 2026 that his division was investigating carbon credit markets, presenting the work as part of the agency’s focus on fraud in emerging markets. He named no targets, and none of the reported recipients has confirmed receiving a request.

Table 1 · What is confirmed, reported and unknown. Sources: Bloomberg via CarbonCredits.com and Briefs, 15 to 18 September 2026; Law360, 16 September 2026.

The CFTC regulates derivatives markets in full, but its authority over spot trading is limited to fraud and manipulation. In its September 2024 order against CQC Impact Investors, the Commission stated that carbon credits are encompassed in the definition of a commodity under the Commodity Exchange Act, and that voluntary carbon credits trade in both spot and derivatives markets.²

That finding brings the issuance and sale of a credit within section 6(c)(1) of the Act and CFTC Regulation 180.1. Regulation 180.1(a)(4) prohibits delivering false or misleading reports that affect the price of a commodity, knowingly or with reckless disregard, and section 13(a) extends liability to anyone who aids or abets a violation.³

This is why the reported requests reach beyond developers. A registry publishes the data on which credits are issued, a VVB attests to it and a rating firm assesses it, so each could be examined for whether false data passed through its hands without adequate review.

Figure 1 · Where liability can arise along the carbon credit data chain. Sources: Commodity Exchange Act sections 6(c)(1) and 13(a); CFTC Regulation 180.1; Jones Day, October 2026; Bloomberg, 15 September 2026.

The CFTC has moved between two approaches to carbon credits over three years. In June 2023 its Whistleblower Office asked for tips on fraud and manipulation in carbon markets, naming ghost credits, double counting and false statements about the environmental benefits of credits, and the agency formed an Environmental Fraud Task Force soon after.⁴

In October 2024 it issued guidance on what exchanges should consider before listing voluntary carbon credit derivatives, including transparency, additionality and the prevention of double counting. It withdrew that guidance in September 2025, stating that its existing listing rules were sufficient.⁵

Miller set out the present approach in March 2026, saying that the CFTC’s era of regulation by enforcement was over and that the division would concentrate on fraud, manipulation and abuse. In May 2026 the CFTC issued a cooperation policy under which a party that self-reports promptly, cooperates fully and remediates has a path to a declination.⁶

Figure 2 · US federal action on voluntary carbon credits, 2023 to 2026. Sources: Jones Day, August 2023 and October 2026; CFTC release 8994-24; Bracewell, September 2025; Skadden, April 2026; Bloomberg, September 2026.

Taken together, these steps show a regulator that has stopped defining what makes a credit sound while continuing to pursue false statements about credits. The judgement on quality therefore stays with registries, the ICVCM, rating firms and buyers, and the CFTC acts when that judgement rests on false data.

The only completed CFTC carbon credit case is the 2024 action against CQC Impact Investors, also known as C-Quest Capital. The Commission found that from 2019 to at least December 2023 the developer repeatedly and intentionally gave false and misleading information to a US carbon credit registry and to VVBs about cookstove and LED projects.²

The data overstated usage and energy savings against the baseline, the registry issued millions more credits than CQC was entitled to, and staff described the falsification internally as managing the data. The parallel complaint against the former chief executive, Kenneth Newcombe, alleges that broken stoves were rebuilt and reported as working, unfavourable survey results were left out and usage surveys were falsified.⁷

Table 2 · Actions in the C-Quest case by agency. Sources: CFTC orders and complaint of 30 September and 2 October 2024; US Attorney’s Office, SDNY, 2 October 2024; SEC order 33-11315; Carbon Pulse, 6 December 2024.

The case set three precedents for the present inquiry. The CFTC treated false data given to a registry as fraud in a commodity, it pursued individuals alongside the company, and the company that disclosed the problem itself avoided prosecution.

Climate Decode screens credit portfolios by methodology version, rating and label, and documents the due diligence behind each purchase.

REDD+ has been the most heavily criticised category in the voluntary market, mainly because legacy methodologies let developers set their own baselines from reference areas they selected and hold them for ten years. The rules have since changed, and Climate Decode’s registry data shows how much of the market has yet to follow.

New methodologies

Verra released VM0048 in November 2023, under which baselines are allocated from jurisdiction-wide deforestation risk maps produced by independent data providers and revisited every six years. Verra inactivated VM0009 and VM0037 at the same time and set transition rules for the remaining legacy methodologies.⁸

The ICVCM approved VM0048, ART TREES and Verra’s Jurisdictional and Nested REDD+ framework in November 2024. Legacy REDD+ methodologies were not assessed, so their credits cannot carry the CCP label unless the project moves to VM0048 and its credits are requantified.⁹

Calyx Global’s preliminary analysis of 15 established Brazilian projects found issuance about 40% lower on average under VM0048, with almost half of the projects falling by 50% or more. Calyx also sees a credible path to ratings of BBB or higher, which it had not previously been able to give REDD+ credits.¹⁰

Isometric entered avoided deforestation in September 2026 with a 100% default leakage deduction and baselines reset at every issuance, building conservatism into each issuance rather than each crediting period.¹¹

Canopy registry data

Every one of the 473.8 million REDD+ credits Verra had issued by 11 May 2026 in Climate Decode’s Canopy registry data came from a legacy methodology, and none from VM0048. Annual issuance fell from 131.4 million credits in 2021 to 14.5 million in 2025, and with 338.2 million retired, 135.6 million remain outstanding.

Figure 3 · Verra REDD+ credits issued and retired by year. Source: Climate Decode Canopy Market Watch registry data, Verra issuances to 11 May 2026 and retirements to 2 June 2026; issuance counted by issuance date.

Retirements have held up better than issuance, at 35.3 million credits in 2025 and 15.9 million in 2026 to 2 June. None of the 51.1 million REDD+ credits retired since January 2025 carried the CCP label, and 23.7 million came from vintages 2020 to 2022, so buyers are still drawing down legacy inventory.

Table 3 · Legacy and new-generation REDD+ compared. Sources: Verra, November 2023; ICVCM, November 2024; Calyx Global, April 2026; Climate Decode Canopy Market Watch registry data, May 2026.

The distinction matters for the inquiry, since the exposure lies in legacy credits issued on baselines the market has since judged too generous. Credits issued under VM0048 or a jurisdictional programme are built so that this question does not arise, a point covered in the ART TREES architecture for REDD+ transactions.

Orphan wells are oil and gas wells with no solvent owner liable for plugging them. US regulators had documented more than 120,000 unplugged orphan wells by early 2026, with a further 250,000 to over 740,000 thought to be undocumented, and the 2021 Infrastructure Investment and Jobs Act provided about $4.7 billion for plugging.¹²

Carbon credits help fund the gap between public budgets and plugging costs of typically $50,000 to $75,000 a well. Each credit represents methane the well would have emitted had it stayed open, so the volume depends on an estimated leak rate, an assumed duration and a conversion factor, none of which is measured over the life of the credit.

Canopy registry data

Climate Decode’s ACR data to 12 May 2026 records 12 projects under the Plugging Orphaned Oil and Gas Wells methodology, with 6.27 million credits issued and 1.10 million retired. ACR inactivated version 1.0 of the methodology on 9 May 2025 pending a version 2.0, while allowing projects with approved measurement plans to complete verification under it.¹³

Table 4 · Orphan-well credits on ACR by developer. Source: Climate Decode Canopy Market Watch registry data, ACR issuances to 12 May 2026 and retirements to 11 May 2026.

Supply is concentrated, the four Heartland projects in Oklahoma accounting for 69% of issuance with 2% of their credits retired. The largest, ACR966, issued 1.89 million credits in October 2024, and the fourth, ACR1072, issued 1.37 million on 4 May 2026, almost a year after version 1.0 was inactivated, as ACR’s transition rules allow.

Grist reported that ACR966’s credits came from six wells, or about 317,000 tonnes of CO2e a well.¹⁴ Over a 20-year crediting period and a 100-year global warming potential of about 28 to 30, Climate Decode calculates that this implies roughly 60 to 65 kg of methane an hour from each well, against the 10 to 30 g an hour that studies find typical of abandoned wells.

Super-emitting wells of 20 to 74 kg an hour have been measured, so such rates are possible but rare. BeZero, rating the project, noted that the recorded values may reflect a worst-case baseline, Rebellion has said it selected high-emitting wells, and nothing in the public record alleges wrongdoing by Rebellion or any other developer.¹⁵

Sources of uncertainty

1. Most abandoned wells emit under 7.5 g of methane an hour, and about 90% of emissions come from fewer than 10% of wells, so credit volumes depend heavily on which wells are selected.¹⁶
2. Leak rates vary daily and seasonally with pressure, temperature and reservoir conditions, one monitored well rising 71% in seven months, so a single site visit can overstate or understate the rate.
3. Methodologies credit 20 or 50 years of avoided emissions, a period RMI describes as essentially arbitrary.¹⁷
4. Using methane’s 20-year global warming potential instead of the 100-year value yields almost three times as many credits for the same methane.
5. A well already on a publicly funded plugging list, or one with a liable owner, could earn credits for plugging that would have happened anyway, which is why ACR limited its methodology to true orphan wells.¹⁸

Not every review finds overcrediting. Brad Handler of the Colorado School of Mines concluded in June 2026 that the active methodologies, taken together, appear unlikely to overstate the total climate benefit, noting that corroding wellheads can make leaks grow over time.¹⁹

Plugging a leaking well delivers a real reduction, and the question the inquiry raises is whether the number of credits matches it. Prices already reflect the doubt, with more than 2 million well-plugging credits offered at $4 to $5 a tonne in December 2025, against the $10 to $30 that experts had expected.²⁰

A finding against a gatekeeper would be the first of its kind, since no registry, VVB or rating firm has been charged over carbon credits. Until the inquiry concludes, each participant faces a different form of exposure, set out in Table 5.

Table 5 · Exposure by participant. Sources: Jones Day, October 2026; CFTC Regulation 180.1; Climate Decode analysis.

Climate Decode expects the inquiry to affect the market in four ways, whatever its eventual findings.

1. Legacy REDD+ and orphan-well credits should trade at a wider discount, as buyers price regulatory risk alongside quality risk in categories where baselines are modelled.
2. Issuance is likely to slow further if registries tighten review before publication, extending the decline that took Verra REDD+ issuance from 131.4 million credits in 2021 to 14.5 million in 2025.
3. Assurance should become more expensive as VVBs narrow their opinions and rating firms qualify their ratings, which raises costs for small projects.
4. Offtake contracts should change, with warranties on data accuracy and obligations to replace cancelled credits becoming standard.

Public price discovery is also thinner than before, since ICE Futures Europe announced on 28 August 2026 that it would delist its nature-based carbon credit futures.²¹ If the inquiry removes false supply without charging the gatekeepers, the remaining market could emerge more credible, an outcome Verra sought in 2024 when it urged the CFTC to act more assertively against fraud.²²

No buyer needs to stop purchasing credits because of the inquiry, although every buyer should be able to show why each credit it holds can be relied on. Five steps are recommended.

1. Holdings of legacy REDD+ and orphan-well credits should be mapped by project, methodology version and registry, so that exposure can be assessed before any finding is published.
2. Buyers should keep a written record of the due diligence behind each purchase, including the rating, methodology version and any CCP label, since that record supports a claim if a credit is later cancelled.
3. New contracts should include warranties on the accuracy of project data and an obligation to replace credits that are cancelled or invalidated.
4. Procurement should favour credits with a documented basis, such as a CCP label, an independent rating, Article 6 authorisation or a measured removal, over credits whose volume rests on a modelled baseline.
5. Developers, registries and VVBs should review baseline and monitoring data now and document the checks made before publication, since the CFTC’s cooperation policy rewards prompt self-reporting.

Due diligence questions

Climate Decode’s Canopy due diligence engine reviews REDD+, afforestation and improved forest management projects against eight questions, drafted by a lead analyst for each project type, checked against source documents and reviewed before release. Table 6 maps each question to the issue the CFTC inquiry raises.

Table 6 · The eight questions in the Canopy due diligence engine. Orphan-well projects are not yet covered by the engine. Source: Climate Decode.

The rating landscape behind Q8 is set out in who rates carbon credits, and the CCP status of Verra’s current standard in the ICVCM’s recognition of VCS Version 5.

Four developments will show where the inquiry is heading. The first is whether any registry, VVB or rating firm is charged, and the second whether the SEC or the Department of Justice joins, as both did in the C-Quest case. The others are whether regulators outside the US act through the international channels the CFTC is reported to be using, and how the criminal case against Newcombe concludes.

The inquiry arrives as the market is already separating credits with a documented basis from those without one. VM0048 and the jurisdictional programmes have rebuilt REDD+ baselines and ACR’s version 2.0 is due to revisit orphan wells, so Climate Decode expects the CFTC’s attention to speed up a repricing already under way, as set out in the VCM market outlook for 2026.

Climate Decode Platform

The registry figures in this analysis come from Canopy Market Watch, which tracks issuance, retirements, ratings and labels across ten registries.

Climate Decode · Advisory

Due diligence on existing credit portfolios

Climate Decode reviews legacy holdings, methodology versions and contract terms, and documents the basis for every credit in a portfolio.

Notes

Sources

This analysis is not legal or investment advice. Reported matters are described as reported, and no allegation is made against any named project, developer or organisation.