Xpansiv
Press
Why hasn’t everybody adopted common reporting and disclosure standards based on independent third-party engineering reporting?
In many ways the industry has already begun to move in that direction, says Peter Schriber, vice president, market development for Xpansiv. The company offers various certifications through connected bodies such as the Verified Carbon Standard and American Carbon Registry. Until now, the emissions reductions efforts of companies like Birchcliff have been internally audited by its own engineers, but Xpansiv aims to replace that with verifiable data that can be traded on its digital platforms. And while auditing is an important part of the Xpansiv platform, it takes it one step further to make it “tradable” thus increasing its inherent value, both for producers and consumers.
“We are pushing the envelope using technology to create more integrity to the market through continuous monitoring (bottom up and top down), including chemical analysis, production accounting, receipts, nominations, site equipment profiles etc. to get a molecular mass balance of the operations continuously,” Schriber explains. “It’s data intensive, in the end it’s all about the numbers but you also need to ask yourself as a consumer: How do you know that what you paid for is in fact produced sustainably”?
Spot carbon exchange CBL Markets expects to see the majority of its trading volumes in standardised benchmarks such as the GEO by the end of the year or early next year, Head of XMarkets Henrik Hasselknippe said Tuesday.
Traditionally, most of the exchange’s liquidity has been in individual projects rather than standardised contracts, which give sellers the right to deliver a range of credit types to buyers as long as they meet the base criteria. But Hasselknippe thinks this is bound to change radically this year, with more market participants entering the space and looking to trade in standardised instruments rather than the individual projects that require a lot of due diligence.
The market share of CBL’s GEO, N-GEO and C-GEO benchmarks has already risen from 5% in early 2021 to 15% by the end of the year, and is likely to breach the 50% mark by the end of 2022 or early in 2023. CBL has seen a huge influx of new market participants and expects to welcome “hundreds” of new clients this year, he said.
“We are seeing an astonishing inflow of new clients. Probably our biggest challenge at the moment is keeping up with the speed of new participants that are coming into the market because we need to onboard them and undergo the KYC checks and do the background registration,” said Henrik Hasselknippe, head of markets at Xpansiv.
Prices on Xpansiv’s CBL market for its Global Emissions Offset Contract rose from less than US$1 at the lowest point in 2021 to close the year at US$8, while its Nature-Based Global Emissions Offset rose from a low of less than US$5 to end at US$15 – some of the biggest price rises seen in any commodity in 2021.
“There is a significant amount of capital coming into the space and it is a direct result of the introduction of financial instruments that the market knows how to use and immediately recognises,” Hasselknippe said.
CME Group announced it will inaugurate a futures contract for CBL’s Core Global Emissions Offset (C-GEO) next month, adding the standardised renewables and tech-based offering to its growing suite of carbon credit products. The March 7 introduction of the CBL C-GEO futures, pending regulatory review, comes just a month after ESG commodities marketplace Xpansiv’s CBL platform launched a spot contract.
“CBL C-GEO futures are the latest in our suite of risk management tools to help bring standardised benchmarks to the rapidly evolving voluntary carbon markets,” said Peter Keavey, global head of energy and environmental products at CME Group, in a press release.
“The answer, as always, lies in the only free lunch in investing: diversification. The more asset classes you hold, the better your outcome.” [Gor] points to 2 emerging “key megatrends” investors should consider homing in on. Namely digitisation and decarbonisation.
Why decarbonisation? According to Gor (quoted by the AFR): ”The interest in and price of carbon have exploded. For example, CBL Markets’ GEO — the world’s first voluntary carbon offset benchmark contract — has rallied more than 900% over the past year. Although investing in carbon as an asset isn’t easy to do, it is well worth the time and effort.”
“It’s unbelievable the amount of capital that’s being mobilised,” says Xpansiv CEO Joe Madden.
The company operates the world’s largest voluntary carbon offset exchange, with more than 120 million tonnes of carbon traded on its CBL Exchange last year. That was a fourfold increase on 2020 and about 36% of global volume. The surge in activity helped the price of carbon offsets leap a staggering 889% last year, making it one of the best performing commodities in the world.