The CFTC, MQD, and Climate Change

In June 2022, the Commodity Futures Trading Commission (CFTC) issued a request for information (RFI) “to better inform its understanding and oversight of climate-related financial risk as pertinent to the derivatives markets and underlying commodities markets.” The financial regulatory agency is one of several working to address climate-related risks present within the financial system. Given its unique role in regulating derivatives and overseeing commodity markets, the CFTC is working to ensure that the private sector may effectively use those products to address its own climate-related risks. Because such risks threaten the nation’s financial stability and private-sector operations, it is imperative the CFTC continue this important work. In responding to the RFI, opponents of these efforts claimed that any resulting rulemakings will violate the major questions doctrine (MQD).

One group of Republican state attorneys general argued that “if CFTC uses its regulatory authority over exchange-traded derivatives to try to address climate change, that effort would constitute the kind of ‘extravagant statutory power’ that the Supreme Court addressed in West Virginia [v. EPA].” This Essay rebuts opponents’ claims, explaining why they misconstrue the Supreme Court’s MQD inquiry. It further undertakes a rigorous MQD analysis of the policy options the CFTC may pursue and concludes that actions the agency may take are unlikely to run afoul of the doctrine.