The Treatment of Carbon Assets under US Federal Securities Laws

Over the past five years, the interest in carbon assets has increased significantly, including the growth in the number of carbon-oriented investment funds formed for the purpose of buying and selling carbon assets. The question as to whether a carbon asset, including an emission reduction unit, can be considered a security for purposes of the US federal securities laws has yet to be addressed by the Securities and Exchange Commission and case law and is ripe for consideration given the increased focus on global climate change issues. This article examines when a carbon asset could be deemed a security under the Securities Act of 1933 and the attendant consequences.