Xpansiv announced a strategic collaboration with S&P Global Commodity Insights and CME Group to enhance the Australian Carbon Credit Unit (ACCU) market. This partnership will introduce new pricing mechanisms, improve liquidity, and provide risk management tools, including ACCU futures contracts.
The effort marks a milestone in carbon markets, allowing for better carbon price discovery and future price risk management.
Strengthening Carbon Price Discovery and Liquidity
Xpansiv, a leading market infrastructure provider for the global energy transition, is set to integrate its existing standardized ACCU spot contracts with a new CBL-Platts ACCU price assessment. This will improve alignment in end-of-day price references and support physical market trading.
CME Group will also launch a CBL ACCU futures contract, scheduled for October 13, 2024, pending regulatory review. This contract will settle against Xpansiv’s CBL spot ACCU market, creating a seamless carbon credit trading experience for market participants.
The collaboration marks the first initiative of its kind for compliance carbon market. This partnership aims to enhance the transparency and liquidity of the ACCU market, a key component in achieving national emission reduction goals.
By leveraging expertise in market insights and commodity exchanges, the collaboration seeks to create a more standardized and efficient trading environment for carbon credits. This, in turn, can promote stronger participation in carbon markets and support global climate efforts.
These carbon credits represent emissions reductions that fund renewable energy and decarbonization projects. Companies purchase these credits to offset their hard-to-abate emissions that they can’t reduce directly.
Ben Stuart, Chief Commercial Officer, Xpansiv, emphasized the importance of their initiative, saying:
“We are pleased to continue our collaboration with market leaders S&P Global Commodity Insights and CME Group, each of which are relied upon for solutions to pricing challenges in the marketplace. Together we have set a new standard for reliable price signals and trading instruments in this important, evolving market.”
A Robust Market for Compliance and Carbon Reduction
The ACCU market has grown rapidly. There are over 3.5 million tons of Australian carbon credits traded through Xpansiv’s CBL platform since January 2023. The new collaboration builds on this momentum by combining robust physical market data, improved price assessments from S&P Global, and a new hedging tool via CME’s futures contracts.
The initiative is designed to give carbon market participants, including major carbon emitters and financial institutions, enhanced tools for price risk management and portfolio reporting.
Brian Casey, Head of Markets Strategy & Partnerships at S&P Global Commodity Insights, noted that the partnership will deliver “a deeper and broader view of value” in the ACCU market.
Australia’s carbon market is rapidly expanding, positioning itself as a major global producer of carbon credits. Recent data from the Clean Energy Regulator shows that 51% of all ACCUs are now by safeguard or safeguard-related entities. Leveraging these volumes could further boost the market.
Rising ACCU Holdings and Issuances
As of Q1 2024, the Australian National Registry of Emissions Units (ANREU) reported a holding of 38.6 million ACCUs. That’s a rise of 2.4 million during the quarter. ANREU issued 3.8 million ACCUs during the same period. This is robust progress towards a record issuance target of 20 million ACCUs for the year.
The number of Safeguard accounts holding ACCUs rose by 11, totaling 54 accounts. Safeguard entities now hold 12 million ACCUs, with a 4.6 million increase in Q1. Many ACCUs are likely held by intermediaries on behalf of these entities, suggesting a higher volume overall.
CME Group’s Peter Keavey, Global Head of Energy and Environmental Products, added that these developments are part of a broader suite of risk management tools designed to help clients meet carbon reduction targets, whether through compliance or voluntary programs.
A Growing Market Infrastructure for Environmental Commodities
CBL will manage futures delivery for positions held to expiration through its Xpansiv Connect™ post-trade infrastructure. This is linked to 14 prominent carbon and renewable energy registries. The CBL ACCU futures will be listed by and governed under the rules of the New York Mercantile Exchange (NYMEX).
Xpansiv has been instrumental in scaling market infrastructure for environmental commodities like carbon credits globally. The company operates the largest spot exchange for carbon credits and renewable energy certificates, as well as leading platforms for environmental portfolio management. This collaboration with S&P Global and CME further cements its role in shaping the future of energy transition markets.
