ECX introduced futures contracts on Certified Emissions Reductions (CERs) on 14 March 2008 into the range of its existing futures and options contracts based on EU Allowances (EUAs). ICE ECX CER Futures and Options contracts will offer carbon risk management opportunities to a range of market participants. CER options contract were launched for trading on 16 May 2008. The burgeoning CDM market may now have access to ECX’s regulated and liquid carbon trading platform.
The ICE ECX CER contracts, with secondary CERs as the underlying unit of trading, will be listed and admitted to trading on the ICE Futures electronic platform and serve the market as cost-efficient, cleared and standardised contracts.
About CERs
The Clean Development Mechanism (CDM) is an arrangement under the Kyoto Protocol allowing industrialised countries with a greenhouse gas reduction commitment (so-called Annex 1 countries) to invest in emission reducing projects in developing countries as an alternative to what is generally considered more costly emission reductions in their own countries. The CDM is supervised by the CDM Executive Board (CDM EB) and is under the guidance of the Conference of the Parties (COP/MOP) of the United Nations Framework Convention on Climate Change (UNFCCC).
CDM projects generates Certified Emission Reduction (CER) credits to qualifying greenhouse gas reduction projects that also provide development benefits to their non-Annex 1 host country. The CERs will be transferable to industrial countries, where they can be applied toward emissions reduction targets. Once a CER has been issued, it carries the same compliance value as an EUA. EU ETS market participants will thus be able to import CER credits for domestic compliance to cover for some of their shortfall. Other parties interested in trading and investment strategies will also be able to benefit from the addition of a standardized exchange-traded CER futures contract. CDM project transactions for 2006 were valued at €3.9 billion (World Bank) and the market continues to see growth in volumes.
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