To sate their voracious appetite for greenwashing offsets, major fossil fuel companies have invested considerable resources and effort to lobby, both directly and indirectly, to weaken carbon market federal regulations in the United States and state regulations in California, concludes a new Carbon Market Watch investigation.
Out today, 17 June 2026, the new CMW report, titled ‘Oil Spill 2: How fossil fuel interests are polluting US carbon market rulemaking’, investigates, through analysing publicly available information and information CMW requested, the lobbying influence of the fossil fuel industry on federal and state legislation in the United States and California.
This second edition follows an earlier investigation into how major fossil fuel corporations exploit their oversized leverage to try and influence major decision-making bodies in the voluntary carbon market.
Oil spill 2 reveals that oil and gas majors and their affiliated associations spent over $273 million between 2005 and 2026 on lobbying efforts aimed at influencing or shaping favourable climate and carbon market legislation and regulation in California. Fossil fuel companies also harnessed the lobbying power of carbon market project developers in which they own stakes.
Although the precise impact of these lobbying efforts is difficult to determine, judging by the outcomes, some of the efforts paid off handsomely for the oil and gas giants.
“Oil and gas majors are not only using carbon credits to support misleading climate claims, they are also seeking to shape the rules of the game to weaken oversight in US climate legislation, dilute anti-greenwashing rules, and delay meaningful emission reductions,” said CMW global carbon markets expert Inigo Wyburd, the author of the report.
Shaping the future(s)
One target of lobbying at the federal level from this hodgepodge of fossil fuel interests was the Commodity Future Trading Commission, which regulates US financial markets and was positioning itself to regulate carbon credits federally. BP and trade associations like the American Petroleum Institute and the International Emissions Trading Association lobbied the CFTC to expand carbon markets and the use of carbon credits, while shrinking oversight.
Opposed to any efforts to tighten carbon market regulations, the fossil fuel industry and affiliated trade associations expressed their opposition through CFTC advisory committees on which they had representatives and through responses to consultations.
Instead, they pushed for a hands-off regulatory approach that favoured maximising the circulation of carbon credits and the legitimisation of carbon credits as a means of achieving net-zero targets through offsetting, which is hugely problematic, especially for oil giants.
California dreams… of oil lobbyists
California has, in many respects, been at the forefront of climate legislation in the United States, with the centre piece its very own emissions trading system known as the California cap-and-trade programme.
This has made the Sunshine State a primary target of fossil fuel industry efforts to influence climate lawmaking.
When it comes to California’s carbon market, fossil fuel companies and affiliated trade associations have invested considerable effort and money into trying to influence carbon credit quality, volume, and duration of offsetting permitted under the cap-and-trade programme. They also focused on efforts to torpedo draft legislation to rein in greenwashing and improve the quality of carbon credits through stronger durability rules and requirements to transparently disclose the use of carbon credits in marketing claims.
Here, they employed similar tactics as at the federal level. They took part in “workshops” organised by the California Air Resources Board, which oversees efforts to reduce emissions and air pollution, such as via the cap-and-trade programme, and sent in letters to directly influence legislators.
Notably, Senate Bill 390, which aimed to close the door on misleading climate claims by introducing stricter carbon credit quality criteria, was ultimately vetoed by California Governor Gavin Newsom, despite facing no recorded opposition. Although this report does not bridge a direct connection between lobbying activity and the bill’s outcome, the decision raises questions about how industry influence may have shaped the political viability of stronger anti-greenwashing measures.
When near-identical provisions were later reintroduced through Senate Bill 1036, they were subsequently withdrawn by the bill’s author following significant coordinated opposition from carbon credit industry groups and fossil fuel lobbies like the California Chamber of Commerce and the International Emissions Trading Association, further illustrating the resistance stronger anti-greenwashing and carbon credit quality measures can face.
No more conflicts of interest
To tackle this clear challenge of fossil fuel influence and overreach, the report makes a number of recommendations. These include excluding carbon credits from California’s cap-and-trade programme, strengthening anti-greenwashing legislation, and tightening conflict of interest rules and regulations to distance fossil fuel lobbyists from (advisory) bodies that focus on climate-related issues.
The report also urges law- and policymakers to eliminate the use of carbon credits for compliance purposes and as a substitute for decarbonisation.
“Climate policymakers should serve the public interest, not the interest of fossil fuel companies seeking to weaken oversight and delay climate action. Government bodies must tighten their rules of engagement to curb anticlimate lobbying,” urges Wyburd.
