Henrik Hasselknippe, head of markets at carbon exchange Xpansiv, said a “culture of transparency” has evolved.​ ​“For example, the registries that issue credits make full project documentation available on their websites. In addition, they often share the name of the owners that ultimately claim the credits, providing an end-to-end view of the provenance, transfer, and retirement of a given carbon credit. That level of transparency is rare in any market.

“In addition, many companies provide detailed data on their carbon credit use in corporate sustainability reports. And uniform disclosure standards contemplated in current regulatory proposals would bring a level of uniformity to reporting, which—done properly—would be a welcome development, from our perspective.”

Another vital factor, Hasselknippe added, that has improved trust, scale and liquidity in the VCMs was the launch of the Global Emissions Offset suite of standardised contracts.​ ​“The establishment of these kinds of benchmarks is a key step in the evolution of any market​.”

Xpansiv subsidiary CBL announced the launch of a new spot contract for the clean cookstoves sector following an expansion in market liquidity and an expected rise in credit issuances over the next few years. The new contract will be called Sustainable Development Global Emissions Offset (SD-GEO) and will start trading on December 5.

It adds to CBL’s existing suite of benchmarks, which also includes the Global Emissions Offset (GEO), launched in 2020, the Nature-based Global Emissions Offset (N-GEO), unveiled in 2021, and the Core Global Emissions Offset (C-GEO), which was started earlier this year.

“Corporates often look for offset projects that mitigate emissions while also having co-benefits for local communities—projects like clean cookstoves,” said Russell Karas, Xpansiv Head of Carbon Market Development.​ ​“This emerging segment of the carbon market will grow exponentially in the coming years, and Xpansiv offers a better way to price and trade these high-quality credits.”

Market infrastructure provider Xpansiv has been granted an Australian financial services licence that will allow it to launch Australian Carbon Credit Unit (ACCU) products on its CBL platform.

“ACCU contracts play an important role in facilitating the growth and legitimacy of carbon markets in Australia. With CBL’s experience developing these markets and similar products — more than 90% of spot exchange-traded carbon credits globally are transacted on CBL — it will actively support and promote that growth,” Xpansiv said. 

Speaking to Carbon Pulse on the sidelines of the ongoing Australasian Emissions Reductions summit in Sydney, [Xpansiv CCO Ben Stuart] said he expected entities to use the platform as a data information hub. “Once we start to get transactions through the platform, I think we will have a very rich data set that will allow people to derive forward price curves and allow the market to look at doing structured products on the back of our data sets.”

A carbon trading platform partly owned by private equity giant Blackstone will become the first exchange to start offering Australian Carbon Credit Unit trading in a move that reflects the expanding interest across the economy in accessing environmental products to help meet decarbonisation goals.​ ​The move will make CBL the first exchange market for ​ACCUs as of the March quarter of 2023.
 
“Alignment between government-led regulatory initiatives and private infrastructure serves to accelerate our shared goal of bringing efficiency, transparency, and liquidity to environmental markets​.”

Launched by CME Group, CBL Global Emissions Offset™️ (GEO®) futures trade on the world’s largest carbon offset exchange—Xpansiv market CBL. GEO contracts represent the growing maturity of this industry, creating a benchmark that other contracts can be priced against. GEO contracts are screened by three of the world’s leading carbon registries and represent an internationally recognised standard to help investors participate in the VCM with confidence. Benchmark contracts like the GEO also provide the transparency required to scale markets and effectively tackle carbon reduction.

The result of these developments is the emergence of a carbon market for spot and futures contracts that are as tradeable and dependable as any other asset class that sits among investment portfolios globally, like foreign exchange derivatives or interest rate futures.

The advent of the GEO carbon benchmark product provides two distinct advantages: it provides users with a liquid, high-quality instrument that is subject to stringent eligibility criteria; and it provides a basis from which to price other contracts across the quality spectrum, helping ensure participants trade at the right price for the right contracts.

As government and the private sector come together to target CO2 more aggressively, the development and utilisation of the voluntary carbon market are sure to accelerate. I believe that growing confidence in carbon offsets and increased collaboration between compliance and voluntary markets will result in a better outcome for all, empowering ambitious targets to become a reality much sooner than would otherwise be possible.

There is no ‘us versus them’ when it comes to voluntary and compliance markets – we share the same goal of achieving net zero, and we need all available tools in the toolbox to achieve that goal. 

“It’s a new sector,” says Henrik Hasselknippe, Xpansiv Head of Markets. “There are a number of participants coming in with solutions to problems that are not always there.”

Part of global exchange platform CBL, Xpansiv covers 41% of the voluntary carbon market. Last year, 122 million tonnes of carbon were traded through its exchange and registry infrastructure. Hasselknippe argues that bilateral trading between counterparties will sometimes be the easiest way to execute a transaction. But what any exchange can do is remove the counterparty risk.

Users of the platform can submit bilateral trades to Xpansiv for clearing and settlement. This process is simplified by the use of standardized contracts, which act as a label to guarantee that each credit will meet a certain set of quality-related criteria.

Exchange platforms understand how fast the market is changing. Operators have been forced to focus on delivering as much granular data as possible. Each carbon credit project ID number will be linked to publicly available registry data according to variables including vintage, location, methodology and monitoring.

“It is mind boggling, this is more information than any commodity trader would likely have on most other commodities they trade,” says Hasselknippe. “Anyone who is an experienced commodity trader will understand how that operates.”