More

    CME Announces Global Emissions Offset Futures

    Stockholm (NordSIP) – Despite a large number of companies and investors making commitments to net-zero emissions in support of the 2015 Paris Agreement, the need to transition some companies to more sustainable business practices requires a variety of solutions to help meet CO2 emission goals. One approach to tackle this problem is to purchase nature-based voluntary offsets, which allows businesses to finance natural climate solutions while transitioning to more sustainable business practices.

    Nature-Based Global Emissions Offset Futures

    In line with this perspective, the CME Group will launch a Nature-Based Global Emissions Offset (N-GEO)™ futures contract on August 1, 2021, pending all relevant regulatory reviews. The derivatives marketplace is launching this new product to help create a more transparent and efficient voluntary emissions offset market.

    “More companies are relying on nature-based offsets as part of their overall climate strategies as the move to net-zero emissions continues to accelerate,” said Peter Keavey (Pictured), Global Head of Energy at CME Group on the occasion of the announcement. “By offering a standardized mechanism for managing the price risk associated with those initiatives, our new N-GEO futures will provide the marketplace with an important tool to help navigate the ongoing energy transition.”

    The new environmental futures were jointly developed with Xpansiv market CBL, a leader in spot energy and environmental markets. Xpansiv launched the Nature-Based Global Emissions Offset (N-GEO) spot contract earlier this year

    “N-GEO futures are designed to provide more efficient price discovery, and a reputable, market-based solution to help clients manage their nature-based offset risk. The contracts are based on the specifications and offset selection criteria of the CBL Nature-Based Global Emissions Offset Spot contract, which launched earlier this year. CBL has designated Verra Registry as the sole carbon offset registry for the delivery and storage of N-GEO eligible offsets, and N-GEO futures are available for delivery of eligible credits under CBL’s Standard Instrument Program,” Keavey tells NordSIP.

    “Following the rapid market adoption of the GEO, we launched the N-GEO in response to rising demand for nature-based solutions,” Xpansiv President and COO John Melby adds. “It brings transparency and price certainty to a vital subset of the offset market, and N-GEO futures will further empower participants to meet climate commitments while promoting biodiversity and supporting developing communities.”

    The contracts cover activities such as afforestation, reforestation, revegetation, wetland rewetting and conservation and improved forestry management all fall under the Agriculture, Forestry and Other Land Use (AFOLU) project category with additional Climate, Community, and Biodiversity (CCB) accreditation.

    Demand and Outlook

    Demand for nature-based offsets as part of a climate reduction strategy has grown substantially over the years, according to Keavey. “More companies and countries are utilizing voluntary carbon markets more broadly as part of their individual solutions. These markets have historically been opaque and fragmented, and we have heard from our clients that there is a need for a standardized mechanism to help discover price and manage risk more efficiently. Both our N-GEO and GEO futures contracts are designed to solve for that, and will help establish global price benchmarks for offset projects. We have already seen a robust pipeline of interest with our GEO contracts and look forward to introducing new products like N-GEO to help our customers navigate the energy transition,” Keavey explains.

    “It remains to be seen how the energy transition will develop and evolve over time, but we will continue to provide our customers with a range of tools to help them manage their risk. Innovation remains key for us. We’ve had a lot of firsts in the industry as exchange-traded derivatives developed and we will continue to anticipate client needs and deliver the products and services their businesses demand,” Keavey concludes.

    Image Courtesy of CME Group

    Filipe Albuquerque
    Filipe is an economist with 8 years of experience in macroeconomic and financial analysis for the Economist Intelligence Unit, the UN World Institute for Development Economic Research, the Stockholm School of Economics and the School of Oriental and African Studies. Filipe holds a MSc in European Political Economy from the LSE and a MSc in Economics from the University of London, where he currently is a PhD candidate.

    Latest Posts

    partner insights

    Cutting meat consumption is by far and away the most important dietary change we can all make to help combat climate change. It will also have a positive knock-on effect for biodiversity.