Carbon Trading

Trading Software for Carbon Emissions and Offsets

 

 

 

The carbon market is the fastest growing market of the decade. Because it combines an ecological answer to carbon emissions with a need to help the energy transition, the increasing regulatory pressure to be compliant with pollution standards and objectives has presented investors and money managers with a huge market when it comes to carbon trading. And it does not look like it is going to stop.

Similar to other commodities markets, retail traders, brokers, hedge funds and banks are increasingly stepping in regulated markets – run by the Exchanges – and into the voluntary carbon offset market created between project developers and end buyers.

Motivations are different. Trading houses tend to prefer Futures and Options in the hope to benefit from a skyrocketing carbon demand. End buyers that need to purchase credits to offset their emissions are more keen on voluntary carbon offsets as this allows them to understand the specificities of the projects they invest in, protect themselves from suspicion of greenwashing and use their investments as marketing and self-promotion tools to demonstrate their ESG concerns.

One way or another, those are financial instruments that are far from being exempt of market risk.

CTRMCloud offers all the required components for carbon emissions trading, from trade capture and book keeping to market risk and back-office management. Thanks to its cross-asset nature by design, risk reports and P&L attribution allow to identify the specific impact of those instruments in cross-asset portfolios. It is for example possible to create n-axis analysis where Power, Biofuels, Sugar / Ethanol and Natural Gas are shocked differently.

 

CTRMCloud supports:

  • Certificates and allowances

  • OTC contracts, similar to physical trades that result in exchange/delivery of the certificates via the selected registries. Attributes (non-exhaustively) can be technology (avoidance, reduction, sequestration, reforestation and others), country, vintage, project-based or guaranteed, project information, delivery, and registry info. Those contracts come under a variety of names but are generally understood as Voluntary Carbon Offsets

  • OTC contracts that are more specific to Biofuel (D3, D4, D5 and D6 RINs) or Biogas (LCFS) in the US

  • Exchange traded contracts: GEOs, NGEOs, EUAs, RECs and upcoming ICE’s NBSs

 

 

At the 2021 Energy Trading Risk Summit in Houston, KWA Analytics named CTRMCloud as one of the top three ETRM providers for Power, Gas, Oil and Carbon. Their presentation can be seen here.

 

 

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