Carbon credits begin trading on one of largest financial exchanges
The futures contract trading will track the value of a voluntary carbon offset contract
MADISON, Wis. -- Trading began February 28 in carbon offset credits, including from growing timber, on the CME exchange (one of the largest financial exchange operators in the world). The trading is in a futures contract called GEO, (or Global Emissions Offset) that will track the value of a voluntary carbon offset contract.
The contracts are voluntary in contrast to regulated credits which are needed when a governmental body (such as the state of California or the European Union) require businesses or other institutions to purchase carbon credits to offset the CO2 emissions. Voluntary offsets are purchased by businesses that have pledged to reduce their carbon “footprint”.
These credits can be sold by owners of timberland based on the value of CO2 that is captured via the growth of their forests. The value of carbon credits to forest landowners is projected to grow based on the growth of forest carbon credit opportunities in the U.S. and the availability to smaller landowners.
Voluntary carbon offset prices fluctuate, but average about $20 per ton of carbon captured or offset.
The workings of the carbon offset market is complex. A video at the attached links describes its background: