Timber Taxes

Carbon futures market trading expected to begin in 2021

The credits are created through measures that maintain or accelerate forest growth

MADISON, Wis. -- Carbon credit markets, including markets for forest carbon, received a big boost in visibility and transparency in late January when the huge financial exchange operator CME Group announced a plan to launch carbon futures trading in early 2021.

CME said trading in the carbon offset futures contracts called Global Emissions Offset futures contracts will begin March 1, pending a regulatory review.

Carbon offset credits are purchased by companies and other institutions to offset carbon emissions that they have been unable to eliminate. Credits are created through measures that maintain or accelerate forest growth or by capturing methane fumes from agriculture. Futures markets allow entities to trade in the future price and delivery of a commodity(Iin this case what would be delivered is a credit --- a form of currency).

"Demand for voluntary carbon offsets is growing around the world as more countries and companies take action toward creating a lower carbon economy," said Peter Keavey, Global Head of Energy at CME Group. "GEO futures will provide a regulated, market-based solution that can help address risk management needs for near-term emissions reduction strategies, as well as a standardized pricing benchmark to help facilitate long-term climate goals."

There have been a variety of new developments in the forest carbon world in the last few months with BP PLC, a giant international energy company, purchasing Finite Carbon, the leading forest carbon credit player.

Also, last year The Nature Conservancy and American Forest Foundation launched a Family Forest Carbon Credit program, which aims to expand availability to the carbon markets to owners of forest land occupying even less than 100 acres.

CME is partnering in the activity with Expansiv, which makes markets in ecology-based commodities “empowering participants to value energy, carbon, and water to meet the challenges of an information-rich, resource-constrained world,” according to a company statement.

“CME envisions its offset futures being a price gauge for the wide variety of credits, similar to how lumber futures are a barometer for the wide array of regional and species specific wood prices,” according to a story in the Wall Street Journal on the CME announcement.


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