Exchange in Focus: ICE Launches its First Nature-Based Solutions Carbon Credit Futures Contract
19 May 2022
The Intercontinental Exchange (ICE), a leading global provider of data, technology, and market infrastructure, has announced that it has launched a Nature-Based Solutions carbon credit futures contract (“NBS future”).
The NBS future, which trades under the contract code NBT, physically delivers Verified Carbon Unit (VCU) credits certified under Verra’s Verified Carbon Standard (VCS) Agriculture, Forestry and Other Land Use (AFOLU) Projects with Climate, Community and Biodiversity (CCB) Certification, with vintages between January 1, 2016, to December 31, 2020.
Each NBS 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 listed NBS futures expiries in December 2022, December 2023, and December 2024.
Participants supporting the contract include Chevron Products Company, a division of Chevron U.S.A. Inc., EDF Trading, Elbow River Marketing Ltd. a fully owned Parkland Fuel subsidiary, the Macquarie Group, Shell, Trafigura, Vertree Partners and Vitol.
“The launch of ICE’s Nature-Based Carbon Futures contract is a significant foundational development in the architecture of global carbon markets, helping to deliver transparency and liquidity for quality nature-based solutions,” said Hannah Hauman, Global Head of Carbon Trading for Trafigura. “The new contract in particular delivers a direct link to Paris-aligned compliance periods, preparing for the next stage of market development as countries operationalize Article 6.”
“Carbon credits have a complementary role to play in the energy transition, but quality assurance is key,” said Michael Curran, Head of Carbon and Environmental Products at Vitol. “We very much welcome the launch of ICE’s NBS futures contract which will facilitate investment in verified carbon mitigating projects and should raise standards and price transparency across the carbon credit-industry.”
“The launch of the ICE Nature-Based Solutions Carbon Credit Future is another important milestone in bringing more transparency and scale to the voluntary carbon market,” said Bill McGrath, Shell’s General Manager for Global Environmental Products. “Carbon credits have an important role in the journey to net zero and innovative market-based mechanisms like this will encourage the flow of capital for the development of nature-based projects.”
“We are excited and supportive of the increasing adoption of the voluntary carbon credit market across the globe. ICE delivers a thoughtful approach to an exchange product that will provide liquidity for this emerging market,” said Elbow River Marketing Ltd., a fully owned Parkland Fuel subsidiary.
“The NBS future is our first contract specifically designed to measure the carbon sequestration and storage capabilities of nature, which we hope will be an important valuation tool to conserve and grow the world’s natural capital base,” said Gordon Bennett, Managing Director of Utility Markets at ICE. “ICE’s environmental markets are instrumental in providing price signals for negative and positive externalities, incentivizing the efficient allocation of capital across the carbon cycle to balance the world’s carbon budget and meet the goals of net zero, providing the mitigation pathway to manage climate risk.”
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 1.4 billion Renewable Identification Numbers have traded on ICE, reflecting ICE’s role as the world’s leading environmental marketplace. In 2021, ICE traded the equivalent of an estimated $1 trillion in notional value of carbon allowances, equal to over half the world’s estimated total annual energy-related emissions footprint. To learn more visit, www.ice.com
SSE Climate Action
The Intercontinental Exchange (ICE) is a founding member of the SSE derivatives network, you can learn How derivative exchanges can promote sustainable development in the new joint report, where SSE initiative and the WFE provide an overview of the role of derivatives markets in relation to sustainability, and highlight ways in which these exchanges can support the transition to more sustainable development pathways. Stock exchanges play an important role in promoting emissions reductions in their markets. SSE Policy brief: Carbon emissions in public markets provides a unique analysis by examining the Scope 1 carbon emissions of the top 100 companies by market capitalization listed on each of the G20’s major stock exchanges. This data can serve as a benchmark for exchanges in their efforts to promote net zero emissions among their listed issuers. The SSE calls on exchanges to express their interest to be involved in the net-zero movement, SSE Policy brief: The Net Zero Movement. Joining the Race-to-Zero, Glasgow Financial Alliance for Net Zero (GFANZ) offers exchanges the best possible option to make an official commitment. The SSE can provide assistance and acts as a secretariat for exchanges within the GFANZ network. If your exchange wishes to learn more or make a commitment to net-zero, feel free to contact the SSE team at climate@sseinitative.orgAbout the SSE
The SSE initiative is a UN Partnership Programme organised by UNCTAD, the UN Global Compact, UNEP FI and the PRI. The SSE’s mission is to provide a global platform for exploring how exchanges, in collaboration with investors, companies (issuers), regulators, policymakers and relevant international organizations, can enhance performance on ESG (environmental, social and corporate governance) issues and encourage sustainable investment, including the financing of the UN Sustainable Development Goals. The SSE seeks to achieve this mission through an integrated programme of conducting evidence-based policy analysis, facilitating a network and forum for multi-stakeholder consensus-building, and providing technical assistance and advisory services.
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