As the world begins to focus more on conserving the environment, many firms are facing pressures and new government regulations pushing them to be “greener”. But some firms cannot meet their carbon emission targets right away, so they purchase carbon offsets.
Carbon offsets are essentially vouchers to make up the difference. They allow businesses to take near-term action to meet carbon reduction goals, while they transition to more sustainable business practices. The money spent on carbon offsets can be put toward emission reduction projects ‒ such as a solar farm or the planting of a new forest.
The purchase and sale of carbon offsets are conducted through carbon offset markets. There are two types of carbon offset markets: voluntary and compliance. In compliance markets, government regulations are enacted for firms to reduce their emissions. Some of the most active compliance markets can be found in California and Europe.
Voluntary markets are non-regulated, and organizations participate based on self-imposed emissions reduction goals. Various industries are represented including government, food and beverage, energy, and aviation companies. As more and more firms and governments turn to voluntary carbon offsets to meet their climate care needs, the market value has grown to approximately $320M ‒ with the volume of carbon offset transactions hitting an eight-year high in 2019 and it continues to grow. With this market growth, there is a need for standardization, transparency, and reliable exchange-cleared instruments.
The CBL Global Emissions Offset futures contract, Globex symbol GEO, is a market-based solution that sets its foundation in an international framework and is positioned to harmonize the buying and selling of offsets from registries and emission reduction projects across the world.
The Global Emissions Offset (GEO) futures contract is a physically settled contract that allows for delivery of CORSIA-eligible voluntary carbon offset credits.
Developed and adopted by the International Civil Aviation Organization (ICAO), CORSIA is a globally accepted carbon offset and reduction scheme. Originally designed by and for the aviation industry, CORSIA’s stringent screening process can be used as a guide for organizations across industries when sourcing emissions offsets. Across the CORSIA-approved registries, it is estimated that 35 to 45 million offsets will be available for purchase in the short term.
The GEO contract sets its foundation in the rigorous selection criteria and review process developed by ICAO and a group of carbon experts from 19 countries known as the Technical Advisory Body (TAB). ICAO and TAB have spent years developing a stringent screening process to determine which offset registries and project types are eligible for CORSIA.
CORSIA-eligible voluntary carbon offset credits for the GEO futures contract will be eligible from the following registries: Verified Carbon Standard, American Carbon Registry, and Climate Action Reserve. In order to be CORSIA-eligible, emissions unit programs must be able to track offsets to avoid double counting, have safeguards in place to address environmental and social risks, and have in place verification procedures. Additionally, CORSIA has defined time parameters to ensure the environmental integrity of the credits. One of the primary goals of the emissions units criteria is to ensure that offsets under CORSIA result in genuine or additional GHG emissions reduction.
GEO futures, from CME Group, will provide greater price transparency with nearly 24-hour trading access through CME Globex, plus the safety and security of CME Clearing backing every transaction. Deliveries will be facilitated by Xpansiv company CBL, a global leader in spot energy and environmental markets. CBL provides secure, seamless access to ESG-inclusive commodities like carbon, renewable energy, water, and gas.
As carbon offsets and their markets continue to grow and evolve, market participants can utilize the Global Emissions Offset futures contract for voluntary offsets with confidence.