Net Zero Markets launches Global Emission Reduction (GER), a new Pricing and Offsetting Benchmark for Voluntary Carbon Markets
- Global Emission Reduction, or GER, provides single global reference price for carbon offsetting
- Presented as a simple to understand one-stop-shop corporate carbon offset, it is designed to reflect how corporate offsetters use the Voluntary Carbon Market
- Product has built-in pathway to net zero and will increasingly boost investment in carbon removal projects
- The GER contract is available for trading on global exchanges: ACX (Singapore) and Nodal Exchange(US) and will soon be listed on EEX (Europe)1
June 17th 2022, London – Net Zero Markets has today launched the Global Emission Reduction or GER, a new carbon pricing benchmark that aims to make carbon offsetting simple, more accountable, transparently priced and accessible for corporates by offering a single global reference price for voluntary carbon markets.
The GER is a hybrid carbon offset made up of four buckets encompassing different elements of the voluntary carbon markets. It is available to be traded as both spot and futures, across the world, on AirCarbon Exchange (ACX) and Nodal Exchange and will be listed on the European Energy Exchange (EEX) later this year.
The product aims to tackle some of the problems with existing voluntary carbon markets by providing a single price for carbon, akin to the standardization and calibration provided by the European Union Emissions Trading Scheme for compliance markets. By combining the current mixture of standards, jurisdictions, project types and vintages into a single price, the GER will help increase both liquidity and transparency in the often-opaque voluntary sector and make it much easier for corporates as well as small and medium-sized enterprises (SMEs) to offset the carbon emissions they are unable to reduce. In line with the Voluntary Carbon Market Integrity Initiative’s recently published Claims Code of Practice, retirements of GERs and the carbon credits that underlie them will be tracked and published by Net Zero Markets to ensure carbon neutral claims using the GER are fully accountable.
“Harnessing the efficiency of markets is the key to tackling the climate crisis,” said Louis Redshaw, CEO of Net Zero Markets. “The only way we can do this in the case of the voluntary carbon markets is through inclusive commoditisation. We are taking what the market is doing today and distilling it into something more accessible, understandable and transparent. The GER is the future of the voluntary carbon market and will allow it to scale.”
The GER will work with markets rather than dictate to them, with the weighting of the four sub-contracts that make up the product updated annually to reflect the actual retirements by corporates that occurred in the previous year. The four sub-contracts consist of the:
- Base Carbon Contract, or BCC, which covers the renewables and energy efficiency sector
- Forestry Carbon Contract, or FCC, which encompasses the agricultural, forestry and land use sectors
- Prime Carbon Contract, or PCC, for those projects with additional benefits that meet at least three of the United Nations Sustainable Development Goals.
- Carbon Capture Contract, or CCC, which covers projects that provide long-lived removal of carbon emissions, such as biochar projects.
By including the CCC carbon removal projects in the basket, the GER will spread the high cost of these credits over the rest of the products, thereby facilitating demand and investment in this key sector. This strategy is vital considering that in most countries, by 2050, all carbon offsets will have to be removal-based rather than purely reduction or avoidance.
“The GER is a liquid and transparent financial instrument that gives buyers access to the entirety of the carbon asset class,” said William Pazos, Managing Director and Co-Founder of ACX. “We are excited to work with Net Zero Markets and our partners at EEX and Nodal on this groundbreaking innovation.”
The proportion of the GER made up by removals is programmed to increase, gradually at first, until it hits 100% by 2050. The balance is made up of carbon credits that reflect the evolving trends in carbon offsetting, for example, if more carbon credits from forestry projects are retired by the global offsetting community, the GER’s make-up will reflect this. In this way the GER offers companies a straightforward, self-contained pathway for businesses to meet their goals without having to constantly change products. Furthermore, with all projects included in the different sub-contracts verified by globally recognized bodies such as Verra and Gold Standard, companies offsetting with the GER can be assured that their claims are credible and aligned with best market practice.
“Robust, trustworthy and secure Voluntary Carbon Markets are instrumental in generating financial investments which are critically needed for a net-zero future,” said Peter Reitz, EEX CEO. “With its basket approach and gradual pathway to net-zero, the Global Emission Reduction contract constitutes a unique and innovative contract as part of our VCM product suite.”
The GER being hosted on global exchanges removes many of the barriers to entry, thereby providing a market-price based product with a low transaction cost that is accessible to as broad a spectrum of market participants as possible. Further, by hosting the GER on exchanges, price transparency and robust transaction reporting is assured.
“Nodal Exchange is very pleased to be working with Net Zero Markets to launch this innovative Global Emission Reduction contract,” said Paul Cusenza, Chairman and CEO of Nodal Exchange. “EEX Group is very well positioned through collaborations with highly experienced industry partners such as Net Zero Markets to become a key player in voluntary carbon markets on a global scale, and Nodal Exchange is proud to play its role in this important and dynamic market.”
For more information on GER, the global reference price for voluntary carbon markets, go to Net Zero Markets at https://www.netzeromarkets.co
About Net Zero Markets:
Net Zero Markets is a company dedicated to developing risk management tools, products and contracts in the global environmental space. Its benchmark Global Emission Reduction product will deliver the level of transparency and commoditisation needed for voluntary carbon markets to flourish, thereby allowing more finance to flow to the projects that are needed to achieve net zero targets.
The company is led by Louis Redshaw, one of the founding figures of the global Carbon Markets. In 2006, he created a standard for trading Certified Emission Reduction (CER) carbon offsets that was adopted by all major market participants and the carbon exchanges. This initiative allowed a secondary trading market in CERs to take-off thanks to the establishment of liquidity and price transparency.
Complementing Louis’s deep knowledge and understanding of carbon markets, the wider team has a wealth of experience innovating and growing markets, with an emphasis on carbon and energy trading and risk management.
ACX is a global exchange revolutionizing the voluntary carbon market. The exchange’s client base comprises corporate entities, financial traders, carbon project developers and other industry stakeholders. ACX provides its clients with an efficient and transparent trading platform which is easy to use, frictionless and with the lowest commission fees available on the market. Its underlying technology will allow the carbon market to scale efficiently to meet global Net Zero ambitions.
As of May 2021, ACX became the world’s first carbon negative exchange, having offset its carbon emissions 12 months into the future (to May 2022) through the Onil Stoves Guatemala Uspantan project. ACX is committed to continuing to offset all of its emissions 12 months forward. In 2022, ACX was named as the ‘Best Solution in Energy Trading’ by Wired UK and Publicis Sapient at their Global EnergyTech Awards, which spotlighted the companies that are ‘Winning the Race to Reinvent Energy’.
The European Energy Exchange is part of the EEX Group, a leading exchange group for Environmental Markets that has operated emissions trading based on the European Emissions Trading System (EU ETS) since 2005 and provided primary auctions in the EU ETS, on behalf of 25 EU Member States.
EEX Group builds secure, successful and sustainable commodity markets worldwide – together with its customers. The group offers trading in power, natural gas, environmental products, freight and agriculturals as well as subsequent clearing and registry services, connecting a network of more than 800 trading participants. The group is based in 19 worldwide locations and is part of Deutsche Börse Group.
For more information go to: https://www.eex-group.com/en/
About Nodal Exchange:
Nodal Exchange is a derivatives exchange providing price, credit and liquidity risk management solutions to participants in the North American commodities markets. Nodal Exchange is a leader in innovation, having introduced the world’s largest set of electric power locational (nodal) futures contracts. As part of EEX Group, a group of companies serving international commodity markets, Nodal Exchange currently offers over 1,000 contracts on hundreds of unique locations, providing the most effective basis risk management available to market participants. In addition, Nodal Exchange offers natural gas and environmental contracts. All Nodal Exchange contracts are cleared by Nodal Clear which is a CFTC registered derivatives clearing organization. Nodal Exchange is a designated contract market regulated by the CFTC.
For more information, please visit: www.nodalexchange.com