Most CBL carbon volume to move to standard contracts by year-end

Quantum Commodity Intelligence - Spot carbon exchange CBL Markets expects to see the majority of its trading volumes in standardised benchmarks such as the GEO by the end of the year or early next year, the head of XMarkets Henrik Hasselknippe said Tuesday.

The exchange, which is owned by Xpansiv, only launched its standardised GEO contract for Corsia-eligible offsets at the end of 2020, followed by N-GEO for nature-based credits in 2021 and C-GEO for technology projects without Corsia eligibility at the start of 2022.

It is the leading platform for voluntary offsets trading, with 300 projects marketing their credits on CBL last year.

Traditionally, most of the exchange's liquidity has been in individual projects rather than standardised contracts, which give sellers the right to deliver a range of credit types to buyers as long as they meet the base criteria.

But Hasselknippe thinks this is bound to change radically this year, with more market participants entering the space and looking to trade in standardised instruments rather than the individual projects that require a lot of due diligence.

The market share of CBL's GEO, N-GEO and C-GEO benchmarks has already risen from 5% in early 2021 to 15% by the end of the year, and is likely to breach the 50% mark by the end of 2022 or early in 2023, he said in a webinar.

"You have multiple natural gas markets around the world, but really you have Henry Hub, TTF and NBP," said Hasselknippe.

"You could see that develop in the global carbon markets where you have four or five global benchmarks and hundreds of different prices."

Market churn, or the number of times a contract changes hands, is now around two for spot voluntary offsets, but this compares with ten for spot allowances from the EU Emissions Trading Scheme, 25 for crude oil and 50 for natural gas.

"We have a lot more room to grow if you look at the way other markets churn," said Hasselknippe.

CBL has seen a huge influx of new market participants and expects to welcome "hundreds" of new clients this year, he said.