The WFE supports the overarching objectives of the UNIDROIT draft Principles and UNIDROIT’s use of existing legal structures and classifications to avoid unnecessary complexity, unintended consequences and market friction. In particular, the WFE would like to express support for:
- Creating Principles for clear and consistent legal treatment of VCCs in and across jurisdictions internationally. Improving international clarity and consistency will support market confidence, encourage prospective market participants, facilitate cross-border activity, decrease transactional risk and costs, address fragmented liquidity and lay the groundwork for how VCCs should be treated in respect to accounting and tax. In particular, the proposals on how to deal with questions of legal domain, reversals of GHG mitigation outcomes, VCCs obtained through wrongful means, VCC nullification, VCCs created as a result of deliberate wrongdoing, and instances of overissuance could settle questions that many jurisdictions and market participants are currently grappling with and facilitate cross-border activity. Coupled with the widespread adoption of global quality assurance frameworks such as the Integrity Council for the Voluntary Carbon Market, this will support VCM growth.
- The flexible approach taken to implementation in the Principles. The Principles are designed to be appropriate for all types of market and legal systems (including both civil and common-law systems). This will facilitate their application in any jurisdiction and support consistent international adoption, facilitating cross-border activity and liquidity. Additionally, the Principles enable States to choose whether, how and to what extent to include the Principles within their private law. This will support broad uptake, including by States that already have laws in place relating to some of the issues covered. It will also enable States to reflect targeted jurisdiction-specific considerations in their implementation.
- Encouraging adopting national competent authorities to deviate only where necessary. Where national competent authorities elect to implement the UNIDROIT Principles, the WFE would encourage them to prioritise international consistency by deviating from the global Principles only where necessary to accommodate jurisdictional realities and needs. Taking this approach avoids unnecessary fragmentation that would likely impede the growth of VCMs.