Financial derivatives marketplace operator CME Group has announced that it will launch a Global Emissions Offset (GEO) futures contract on March 1, 2021, pending all relevant regulatory reviews. The new contract, which will provide customers with a market-based solution to manage global emissions risk, was jointly developed with Xpansiv market CBL, a leader in spot energy and environmental markets.
“Demand for voluntary carbon offsets is growing around the world as more countries and companies take action toward creating a lower carbon economy,” said Peter Keavey, Global Head of Energy at CME Group. “GEO futures will provide a regulated, market-based solution that can help address risk management needs for near-term emissions reduction strategies, as well as a standardized pricing benchmark to help facilitate long-term climate goals.”
“After a decade building the largest voluntary carbon market in the world, it’s remarkable to witness this watershed moment,” said Xpansiv Chief Strategy Officer Nathan Rockliff. “We’ve worked closely with myriad stakeholders—corporates, project developers, trading firms, airlines, and leading standards like VERRA, CAR, ACR—to develop the GEO, the first standardized contract for carbon offsets across multiple project types and geographies. The GEO helps to establish a global price for the voluntary carbon market based on offsets vetted by a multi-year process, and with this landmark futures contract, CME Group and Xpansiv provide a clear path to action for net-zero commitments.”
The Taskforce on Scaling Voluntary Carbon Markets, a private sector-led voluntary carbon market initiative, has published recommendations around the need for a physically-delivered futures market, stating that it could help achieve a more robust and transparent voluntary offset market. CME Group is a member of the Taskforce alongside many of its clients and market participants.
Voluntary offsets allow businesses to purchase credits to help reduce their overall carbon footprint as they work to transition to more sustainable business practices. The scale of trading in the voluntary carbon offset market is currently around $320 million and this is expected to grow as demand for global decarbonization increases and climate hedging strategies become more standardized.
The GEO futures contract is based on the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA), which includes globally accepted carbon offset standards based on a set of rigorous criteria developed by the International Civil Aviation Organization (ICAO), a specialized agency of the United Nations.
GEO futures will allow for delivery of CORSIA eligible voluntary offset credits from three ICAO approved registries and will be listed by and subject to the rules of NYMEX.
CME Group enables clients to trade futures, options, cash and OTC markets, optimize portfolios, and analyze data – empowering market participants worldwide to efficiently manage risk and capture opportunities. CME Group exchanges offer the widest range of global benchmark products across all major asset classes based on interest rates, equity indexes, foreign exchange, energy, agricultural products and metals. The company offers futures and options on futures trading through the CME Globex platform, fixed income trading via BrokerTec and foreign exchange trading on the EBS platform. In addition, it operates one of the world’s leading central counterparty clearing providers, CME Clearing. With a range of pre- and post-trade products and services underpinning the entire lifecycle of a trade, CME Group also offers optimization and reconciliation services through TriOptima, and trade processing services through Traiana.
Xpansiv is the global market for ESG-inclusive commodities. These Intelligent Commodities bring transparency and liquidity to markets, empowering participants to value energy, carbon, and water to meet the challenges of an information-rich, resource-constrained world. The company’s main business units include CBL, the leading spot exchange for ESG commodities, including carbon, renewable energy certificates, and Digital Natural Gas; H2OX, the leading spot exchange for water in Australia; and XSignals, which provides end-of-day and historical market data. Xpansiv is the digital nexus where ESG and price signals merge.