CME Group to launch nature-based carbon offset contract

London, (Quantum Commodity Intelligence) - CME Group, one of the world's biggest owners of exchanges, is to launch a second carbon offset contract in a bid to capture the rapidly growing market for emission credits.

The Chicago-based company, which owns Nymex and the Chicago Board of Trade, will launch "nature-based" carbon futures contracts on August 1 this year that will be physically settled.

"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, global head of energy at CME Group in a statement.

"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 N-GEO futures contract - short for nature-based global emission offset - was developed in conjunction with spot exchange Xpansiv, which earlier this year launched a spot contract of the same name for nature-based carbon offsets.

Projects that are eligible include those that earn credits by cutting emissions from agriculture, planting trees or incentivising communities not to chop down existing forests.

The credits are seen as having more sustainable non-carbon benefits than other credits, such as the GEO contract, and as such trade at a premium to offsets that merely cut emissions.

Currently, the GEO offset trades at around $2.50/mt, with nature-based credits $2-3/mt higher.