N-GEO futures follow the industry leading Verified Carbon (VCS) Standard for Agriculture, Forestry, and Other Land Use (AFOLU) projects and require additional certification of Verra Registry’s stringent Climate Community and Biodiversity (CCB) Standard, which identifies projects that simultaneously address climate change, support local communities and smallholders, and conserve biodiversity.

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As more companies rely on nature-based offsets as part of their individual climate strategies, N-GEO futures provide a standardized tool for managing the price risk associated with those initiatives. N-GEO futures are the latest market-based solution to help create a more transparent and efficient voluntary emissions offset market.

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A variety of solutions have emerged to help meet net-zero targets, including projects that protect or restore natural ecosystems, which remove greenhouse gases from the atmosphere. The purchase of nature-based voluntary offsets allows businesses to finance natural climate solutions while transitioning to more sustainable business practices.

CME Group’s customers have expressed demand for a standardized offset contract that focuses on AFOLU projects. According to the Intergovernmental Panel on Climate Change, the AFOLU sector is responsible for just under a quarter of GHG emissions associated with human activities. One way to mitigate emissions from this sector is through the generation and sale of AFOLU emission offset credits. A barrier to achieving this at scale is the lack of a standardized pricing benchmark. N-GEO futures help improve price discovery and provide a transparent platform for managing nature-based offset risk.  

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Offsets delivered via the N-GEO futures delivery mechanism must be the following criteria:

1. VCS AFOLU Project: A project qualifying and verified under the Verra Registry Agriculture, Forestry and Other Land Use (AFOLU) sector program methodologies (found here): and
2. CCB Label/Certification: Projects and Units certified and labelled under at least one Climate, Community, & Biodiversity Standards, Rules for the Use of Climate, Community, & Biodiversity Standards, Version 3 (found here)
3. Vintage: Please see an overview of vintage availability below.

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The Verra Registry’s CCB Standard is designed to go beyond emission reduction by supporting local communities and conserving biodiversity. In order to be certified under the CCB Standard, projects must adhere to independent auditing requirements, follow approved accounting methodologies, and be tracked in Verra’s registry system.

For more detail information, please see Verra’s CCB landing page: https://verra.org/project/ccb-program/

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Please see details on registering with CBL and the Verra Registry in the GEO section below.

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N-GEO futures are complementary to GEO futures, providing CME Group customers with another standardized and transparent platform for managing their voluntary emissions offset risk.

N-GEO is set in the rigorous criteria outlined in Verra’s CCB Standard. There are many similarities between the N-GEO and GEO contracts such as their expiration calendar, contract size (1,000 offsets), tick size, and block minimum. Both contracts also settle against CBL’s spot markets and utilize CBL’s EMA system for deliveries. The key difference is the underlying projects available under each contract. N-GEO also only allows for delivery from one registry, Verra, while GEO allows for delivery from three. Another key difference is that GEO’s vintages are fixed while N-GEO’s vintages are rolling.

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Like the GEO contract, N-GEO can be traded electronically or as a block transaction through a voice broker. Electronic spread markets are also be listed between N-GEO and GEO, allowing firms to execute inter-commodity spread transactions with no leg risk.

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The Global Emissions Offset futures (GEO) contract is a physically settled contract that allows for delivery of voluntary carbon offset credits eligible within the Pilot Phase of CORSIA from three registries: Verified Carbon Standard (VCS), American Carbon Registry (ACR), and Climate Action Reserve (CAR). Deliveries will be facilitated through CBL, a global leader in spot energy and environmental markets.

Please see the Global Emissions Offset futures contract specifications for more information. 

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CME Group’s global customers are in search of a way to manage future price risk associated with carbon markets across regions. The GEO contract enables increased price transparency for voluntary carbon offsets in future months and provides a mechanism for convergence across different carbon registries and project types.

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CBL is a global exchange platform for transacting spot energy and environmental commodity products such as carbon, renewable energy, water, and natural gas. For more information, please visit cblmarkets.com.

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The International Civil Aviation Organization (ICAO), a UN specialized agency, adopted the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) as a market-based mechanism to meet an ambitious goal of carbon neutral growth from international aviation beyond 2020. For the Pilot Phase the the ICAO has approved seven eleven voluntary carbon offset registries that airlines can use to comply with CORSIA; three of which are included in the futures contract.

Please see the link below for more information on CORSIA:

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CME Group and CBL chose the three CORSIA-eligible registries based on a variety of a criteria including access to credits and the ability to resell credits under the programs.

Please see the links below for more information on each eligible registry:

Please register for VCS here: https://registry.verra.org/mymodule/reg/AHAgreement.asp

Please register for CAR here: https://thereserve2.apx.com/mymodule/reg/AHAgreement.asp

Please register for ACR here: https://acr2.apx.com/mymodule/mypage.asp

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To be eligible in the GEO contract credits shall comply with all requirements set by CBL Market in its Standard Instruments Program (SIP) schedule 1: CBL Global Emissions Offset (“GEO”) Standard Spot Contract.

Please refer to CBL’s SIP here: https://xpansiv.com/wp-content/uploads/2023/03/CBL-SIP_V3_24-March-2023.pdf

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While CORSIA sets the foundation for the GEO contract, carbon offsets that fall under this program should appeal to a wide range of firms that are looking to reduce carbon emissions in a meaningful way. The criteria for CORSIA was chosen as it was established for over four years and verified through a standardized process under UN guidance.

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The GEO contract is a “seller’s option” contract, meaning that a firm that expires short with intent of making delivery against the futures contract selects which eligible registry it will delivery carbon offsets from. All participants that chose to make or take delivery must be registered with CBL and with the three eligible carbon registries ahead of futures expiration. Firms taking delivery will receive an offset credit from a registry and project that meets the CORSIA criteria.

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There is no CBL application, but clients may register for EMA through CBL. Applicants must provide Supplemental Evidentiary Documentation:

• A Certificate of Formation in the name of the applicant
• Evidence of Authority for the registering account manager to open the EMA account on behalf of the entity. For example, board or member resolution authorizing the opening of the account on our registry or letter of authorization on company letterhead executed by company director authorizing the account manager to open and manage the account.
• A copy of the account manager’s current government-issued ID (driver’s license or passport)
• A list of registry accounts planned to be linked in EMA: account title, account number, user ID, password, and EMA Ops log in
• XCHG EMA Agent Designation
• A list of additional EMA users, if needed

Each GEO-eligible registry has its own set of requirements and supplemental documents.

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Firms are not required to onboard with CBL and the three registries to trade GEO futures. These registrations are only required if a firm plans to make or take delivery via the futures mechanism. Just like any other physically settled futures contracts, firms may choose to avoid delivery by exiting their position, rolling their position, or conducting an Exchange for Physical (EFP) transaction.

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GEO futures can be electronically traded through CME Globex or cleared as block transactions via CME Clearport.

To learn about access to CME Group’s front end trading system, CME Direct, visit https://www.cmegroup.com/trading/cme-direct.html.

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Futures contracts cleared with CME Group offer a host of features and capabilities such as mitigated counterparty risk, robust audit trail for compliance purposes, efficient price execution, access to a wider variety of buyers and sellers, and a transparent settlement process.

For 100 years, CME Group has been a leader in centralized clearing ‒ offering global benchmarks in the Interest Rate, Energy, Equities, Agriculture, Metals, and Foreign Exchange space. CME Group is excited to continue to leverage its experience and reputation to help advance global environmental markets.

Learn more about futures here: https://www.cmegroup.com/education/courses.html.

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The Trailing futures contracts allow buyers and sellers to trade emissions offset credits that are no longer within the eligibility window of the main and N-GEO contracts.

The market structure of voluntary offsets is such that buyers have preferences for different vintages and types of offset credits. The current N-GEO contract specs specify a range of vintage years are that are allowed in each contract. Each year, this eligibility window moves forward according to a specific schedule. To capture the earlier vintages as the eligibility window rolls forward, CBL Xpansiv introduced “Trailing” spot contracts on N-GEO.

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The Trailing futures contracts complement the N-GEO contracts so that market participants can manage different vintage ranges more effectively. The Trailing contracts allow for price discovery for vintages that are no longer eligible for delivery in the main contracts.

As the eligibility window rolls forward, offsets from previous years are no longer eligible for delivery against the respective futures contracts. To help entities manage those vintages, CBL Xpansiv launched spot contracts that trail behind the N-GEO eligibility window.

For example: An N-GEO forestry project that restores tropical forests in South America will issue credits year after year. When the 2020-2025 vintage N-GEO eligibility window rolls forward to 2021-2026, entities will still be able to trade and deliver 2020 forestry credits with the N-GEO Trailing futures contract. Trailing contracts can give participants more flexibility and choice in executing their risk management strategy.

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For each contract, the vintage years are documented in the CBL Standard Instruments Program. Each year, on July 1, the vintage year is moved forward, meaning the oldest vintage year is no longer eligible and a new year is added to the main N-GEO contract. The vintage year that became ineligible in the main contract is added to the eligibility window of the respective Trailing contract. The below graphic depicts the yearly breakdown of CBL Xpansiv’s eligibility windows and Trailing contracts from now until 2027.

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The projects represented by the N-GEO offsets are the same projects that make up the N-GEO Trailing contracts - the only difference is the vintage year of the credit offsets. See the below sections for details about project eligibility.

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These Trailing contracts can be traded the same way that the main N-GEO contract is traded.

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