ASX to list Carbon Futures
Fri 13 Oct 2023
As per ASX Notice 1034.23.10 Market Participants are advised that ASX intends to launch a suite of Carbon Futures products on the ASX 24 Market in 2024 to support Australia and New Zealand’s decarbonisation efforts and energy transition toward net zero. Carbon Futures will provide a transparent forward curve for the market to hedge and price the renewable energy transition as the world moves closer toward crucial emission reduction targets.
Demand for carbon credits continue to increase with Governments and corporates heavily focused on meeting their compliance and voluntarily emissions targets over the coming years. The Australian and New Zealand Governments have committed to achieving net-zero emissions by 2050 and are targeting a reduction of 43% and 50%[1] respectively in Green House Gas (GHG) emissions by 2030. Much of the private sector have also committed to net zero emissions targets by 2025 or 2030.
Green energy and carbon reduction infrastructure requires significant investment and time to develop. Carbon offsets (i.e. carbon credits) support the transition to net zero by directing funds to renewable energy projects and decarbonisation efforts whilst allowing organisations to meet their emissions targets.
ASX plans to list three deliverable Carbon Futures contacts underpinned by three separate markets, subject to final internal and regulatory approvals. The three contracts are:
- Large Generation Certificate (LGC) Futures
- New Zealand emissions Unit (NZU) Futures; and
- Australian Carbon Credit Unit (ACCU) Futures
Key Features
- Transparent forward curve: Carbon Futures may improve price and data transparency by creating a liquid forward curve out to 5 years that is readily tradable and based on transaction and/or bid-offer data
- Standardised: Each Futures Contract is generic with one Future equal to 1,000 tonnes of CO2 equivalent not released into the atmosphere[2]
- Deliverable: A deliverable contract offers an alternative avenue to access carbon credits. Those holding positions at expiry will be required to deliver or take delivery of underlying certificates with ASX facilitating end to end delivery to maintain anonymity throughout trading lifecycle
Timeline – subject to internal/external readiness and regulatory approval
LGC and NZU Futures
The tentative listing date for LGC and NZU Futures is late July 2024. Tentative testing dates for LGC and NZU Futures are currently April - May 2024 and will involve Clearing Participants (mandatory), Trading Participants and end users.
ACCU Futures
The tentative listing date for ACCU Futures is currently October 2024 however, this is dependent on the upgraded ANREU registry being operational by Q2-2024. Tentative testing dates for ACCU Futures are currently mid July – mid Sep 2024 and will involve Clearing Participants (mandatory), Trading Participants and end users.
Draft Contract Specifications
| Specifications | LGC Futures | NZU Futures | ACCU Futures |
| ASX contract code | CL | CN | CA |
| Underlying | Large Generation Certificates, which represent one megawatt hour (MWh) of renewable energy generation | New Zealand Emissions Units (NZU’s), which represent one tonne of carbon dioxide equivalent (CO2) greenhouse gas that is not released into the atmosphere | Australian Carbon Credit Units, which represent one tonne of carbon dioxide equivalent (CO2) greenhouse gas that is not released into the atmosphere |
| Contract unit | 1 Futures contract is equal to 1,000 underlying certificates (LGC’s) | 1 Futures contract is equal to 1,000 underlying certificates (NZU’s) | 1 Futures contract is equal to 1,000 underlying certificates (ACCU’s) |
| Contract type | Standardised | Standardised | Standardised - no co-benefits |
| Contract months | January, up to 5 years ahead (annual listing) with the first contract January 2025 | May, up to 5 years ahead (annual listing) with the first contract May 2025 | March, up to 5 years ahead (annual listing) with the first contract March 2025 |
| Trading hours | 10:00am – 4:00pm AEST/AEDT | 10:00am – 4:00pm NZST/NZDT | 10:00am – 4:00pm AEST/AEDT |
| Registry (for delivery) | Renewable Energy Certificate registry | New Zealand Emissions Trading Register | Australian National Registry of Emissions Units |
| Settlement method | Deliverable. LGC’s must be delivered into the REC registry prior to 4:30pm on the Final Trading Day | Deliverable. NZU’s must be delivered into the NZETR registry prior to 4:30pm on the Final Trading Day | Deliverable. ACCU’s must be delivered into the ANREU registry prior to 4:30pm on the Final Trading Day |
| Price quotation | AUD $0.01 | NZD $0.01 | AUD $0.01 |
| Blocks/EFP’s | Yes (block minimum 25 lots) | Yes (block minimum 25 lots) | Yes (block minimum 25 lots) |
[2] Or 1,000 MWh of renewable energy generation for LGC’s
What do I need to do by when?
Participants are encouraged to review the draft contract specifications and tentative dates outlined above and factor these into internal project/resourcing plans. Market Participants wanting to trade ASX Carbon Futures should be in contact with their Clearing Participant to ensure they are aware of the listing and will be set up to clear the new product(s) from go live. Participants wanting to trade the product and potentially go to delivery should also commence set up of accounts with the relevant registries.
ASX will be in contact with Trading and Clearing Participants and software vendors over the coming months to discuss the contract specifications and change management program.
Need more information?
Issued by
Monique Bell, Manager, Commodities
Contact information
Monique.bell@asx.com.au
or
Customer Service
(02) 9338 0000