Carbon Credit Markets Hit the Brakes: Xpansiv Report Reveals Sluggish Growth

"Carbon Credit Markets Experience Sluggish Momentum as Xpansiv's Market Update Reveals Slowdown"

Carbon credit markets have experienced a slowdown in momentum after a period of acceleration, according to Xpansiv’s market update. Xpansiv is a global energy transition market infrastructure provider that trades ESG commodities such as carbon, RECs, digital fuels, and water rights. Both the CBL spot exchange and CME Group’s CBL GEO emissions futures complex saw light volumes in carbon credit trading last week. However, there is still high interest from companies, especially those facing fiscal year-end reporting deadlines on March 31.

Companies are focused on purchasing currently available credits, regardless of their eligibility for compliance and best-practice regimes scheduled for implementation in 2024. Airlines and other companies are actively assessing the potential impact of unresolved Article 6 issues on CORSIA (Carbon Offsetting and Reduction Scheme for International Aviation). Concerns primarily revolve around regulatory and legal uncertainties regarding credit certification under the current compliance phase of the UN scheme, particularly related to corresponding adjustments.

Spot prices remained stable week over week, according to Xpansiv data. The N-GEO saw small trades at $0.43 and $0.50 but closed at the same $0.37 assessed price as the previous week. On the other hand, the CBL N-GEO December futures experienced a $0.56 decline, essentially erasing the previous week’s $0.70 gain. The CBL GEO December futures decreased by $0.20, closing at $0.66 and giving back a portion of the prior week’s $0.25 gain. The spot GEO slipped by $0.05, closing at $0.54. In November of last year, spot GEO jumped by 52%, while N-GEO futures increased by 40%.

CBL’s spot carbon credit volume totaled 72,232 tons, with 57,225 nature credits and 11,307 technology credits. Additionally, trades in Australian Carbon Credit Units (ACCUs) contributed 3,700 tons. Last week, CBL traded 3,000 HIR ACCUs at $36.40 and 700 generic ACCUs at $33.75. The N-GEO Trailing instrument on CBL emerged as the most active spot contract, indicating continued appeal for the 2016-2017 vintage credits delivered through this contract. In contrast, CME Group’s CBL emissions futures saw a total volume of 2,695,000 tons, with an open interest reaching 10,387,000 tons by the end of the week.

In the North American market, Massachusetts solar markets took the lead in NEPOOL trading as the 3rd Qtr generation trading period began. Over 29,000 2023 solar carve-out II credits were matched on-screen, initiating at $260 and settling at $258.50. In the same market, NEPOOL quad and dual qualified class I credits were initially traded at $39.75, but subsequent offers resulted in quad-qualified credits settling at $39.20 and dual-qualified credits at $39.05. In PJM markets, 6,730 2023 Virginia solar credits were successfully matched at $31.25. Pennsylvania tier I markets saw a few transactions, with 2024 credits trading at $31.75 and their 2023 counterparts priced at a $0.25 discount. Additionally, 2,000 Maryland tier II credits were matched on-screen at $14. These trading activities provide insights into the dynamic landscape of regional solar markets, showcasing fluctuations in credit values and volumes.

The data reflects the ongoing developments and pricing trends for renewable energy credit markets in Massachusetts, Virginia, Pennsylvania, and Maryland. Xpansiv’s CBL standardized contracts key and the corresponding definition can be found on their website, along with more information on their spot standardized contracts. Information on the CBL GEO futures contracts is available on the CME Group website. Existing participants can log in to take a closer look or list orders.

Matt Lyons

Matt Lyons

Matt Lyons is the founder of Forestry & Carbon. Matt has over 25 years as a forestry consultant and is invoilved in numerous carbon credit offset projects.

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