08.18.2022

ICE Launches 10 Nature-Based Solutions Carbon Credit Futures

08.18.2022
ICE Launches 10 Nature-Based Solutions Carbon Credit Futures

Intercontinental Exchange, a leading global provider of data, technology, and market infrastructure, announced that it has launched 10 new Nature-Based Solutions Carbon Credit futures contracts, providing a carbon credit futures contract portfolio which allows market participants to buy, sell and hedge carbon credits from 2016 out to 2030.

“The structure for the new carbon credit vintages was developed through extensive discussions with a wide community covering corporate buyers, developers, trading houses, and financials,” said Gordon Bennett, Managing Director of Utility Markets at ICE. “We believe that the new carbon credit futures satisfy the key demands of the market. They allow single-vintages to be traded with the added liquidity benefits from having each futures contract deliver a fixed five-year vintage bucket, they provide a forward curve out to 2030, and customers can extend carry trades for multiple years while trading vintage spreads without the basis risk from the cost of carry.”

On August 15, the day the new contracts launched, 45 lots in the vintage ranges 2017-2021 (OVA) and 2018-2022 (OVB) traded. Chevron Products Company, a division of Chevron U.S.A. Inc., Hartree Partners, Mercuria, Trafigura and Vitol, were involved in trading the new contracts. Evolution Markets Limited brokered some of the trades.

“Mercuria is excited to work with ICE on trading these new contracts”, said Adam Raphaely, Managing Director of Trading at Mercuria Energy America. “Their introduction further demonstrates ICE’s innovative approach toward coalescing liquidity around emerging environmental markets and products. Mercuria is committed to supporting markets that facilitate emission reductions in the energy transition.”

“The development of a deep and liquid financial market for carbon credits will help us reach net-zero,” said Michael Curran, Head of Environmental Products at Vitol. “Carbon credits have a key role to play, both in mitigating climate change and addressing other sustainability issues. We are pleased to be part of this latest exciting phase in the market’s evolution.”

“We are pleased to have worked with ICE to create this new contract and execute its first trades,” said Ariel Perez, Head of Environmental Products at Hartree Partners. “We are excited for the additional transparency and new levels of choice it brings to the market for buyers of carbon credits.”

With the addition of the 10 new contracts to the existing 2016 to 2020 nature-based solutions future, ICE now offers 11 carbon credit futures, each covering a fixed period of five years, from January to December from 2016 to 2030. Each futures contract has its own set of expiries which are outlined in each contract specification:

ICE’s Nature-Based Solutions Carbon Credit futures contract physically delivers Verified Carbon Unit (VCU) credits. Each futures contract is equal to 1,000 carbon credits, where each credit is equal to the removal or reduction of one metric ton of greenhouse gas emissions achieved by projects that preserve and maintain natural ecosystems.

ICE has operated environmental markets for almost two decades. During this time, over 100 billion tons of carbon allowances, over 250 million renewable energy certificates, three billion carbon credits, and the equivalent of over 1.7 billion Renewable Identification Numbers have traded on ICE, reflecting ICE’s role as the world’s leading environmental marketplace.

Source: ICE

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