07.02.2021

Record Growth in ICE US Environmental Complex

Intercontinental Exchange, a leading global provider of data, technology, and market infrastructure, announced record growth in ICE’s North American environmental complex as increasing numbers of participants use these markets to price and manage climate risk.

The North American environmental complex is made up of futures and options on California Carbon Allowances (CCAs), California Carbon Offsets (CCOs), Regional Greenhouse Gas Initiative Allowances (RGGI), Low Carbon Fuel Standard (LCFS) Credits, and Renewable Energy Certificates (RECs). Average Daily Volume (ADV) has grown 20% on average every year since 2017, while open interest hit a record high of more than 1.1 million contracts on June 25.

Today, 6.9 million tons of carbon dioxide trades each day through ICE’s CCA market, with open interest in CCA futures and options at 445,451 contracts as of June 28. In RGGI futures, 121,319 contracts have traded year-to-date, with ADV up 69% versus last year.

ICE has been active in carbon offset markets since 2008, with more than 3 billion tons of Certified Emission Reductions (CERs) traded on ICE. In April 2019, ICE launched California Carbon Offset (CCO) futures. Approximately 1.9 million tons of CCOs have traded on ICE to date, with a record 760,000 CCOs traded in the month of June 2021 alone.

“ICE offers investors access to the most liquid environmental markets available, providing transparent price signals which allow customers to price and manage climate risk globally and accurately value the energy we generate and consume,” said Gordon Bennett, Managing Director, Utility Markets at ICE. “Carbon pricing plays a key role in helping erode so-called “green premiums”, meaning the difference in cost between a product that involves emitting carbon and an alternative that doesn’t. The growing number and range of participants actively trading our environmental markets reflects the powerful momentum, created through a combination of policy and economics, which is driving and supporting environmental programs globally.”

U.S. Renewable Energy Certificate (REC) markets are among the most liquid and transparent green certificate markets available. ICE’s REC futures contracts are for renewable energy certificates issued by a specific state’s renewable portfolio standard (RPS). ICE offers investors REC futures from five different state RPS programs. A total of 463,228 REC futures have traded in 2021 as of June 29, equivalent to almost 30 million megawatt hours of renewable energy or enough to power around 2.7 million homes for a year. Open interest in ICE’s REC futures stands at 577,904 contracts.

ICE hosts the four largest and most liquid carbon cap and trade markets in the world. ICE’s European Emission allowance market is the largest in terms of volume, followed by ICE’s California Carbon allowances. With the successful introduction of the UK carbon market in May 2021, ICE UK allowances now contend with Regional Greenhouse Gas Initiative (RGGI) allowances as the third largest carbon market.

More than 14 gigatons of carbon trades on ICE annually, equivalent to approximately 40% of the world’s total annual energy-related emissions footprint based on current estimates. From 2017 to 2020, the number of participants trading ICE’s carbon markets increased by more than 40%. Participants based in North America were the strongest contributor to this growth, increasing by more than 70%. Meanwhile, the number of participants trading both European and North American carbon markets at ICE grew by approximately 85%.

Source: ICE

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