For the second time since May 2007, Republican lawmakers have asked the Government Accountability Office (GAO) to conduct an inquiry into the voluntary carbon offset market.

On January 16, Rep. Joe Barton and John Shimkus, ranking Republicans on the House Energy and Commerce Committee, expressed concerns that carbon offsets not “become the 21st century version of snake oil and patent medicine,” and noted that “[t]o our knowledge, no proven safeguards against fraud and deception presently exist, making the carbon offset market a ripe target for hucksters.”

This most recent request comes as the Federal Trade Commission (FTC) is conducting a review of its environmental marketing guidelines to consider the need for specific carbon marketing guidelines, a review spurred in response to a request by Democratic Congressman Ed Markey in July 2007. Private entities as well as academic and nongovernmental entities also have expressed support for greater oversight of the carbon markets.

This increased scrutiny is likely good news in the long-term for both voluntary and mandatory carbon markets in the US, particularly if it leads to more uniform, and rigorously enforced, standards. For voluntary markets, uniform standards will help increase consumer and investor confidence in the validity of offset projects. A more stable voluntary market, in turn, will increase the confidence of lawmakers and their constituents to include carbon offset trading programs as an effective component of any new federal or state legislation. The biggest question remains whether such standards will be set by one of many third-party groups proposing standards or by a government entity like FTC or the Environmental Protection Agency.

For further information about this topic, please contact Akin Gump.