CBL C-GEO contracts see early interest from carbon market

The C-GEO 1 and C-GEO 2 contracts launched Jan. 5 on the New York-based exchange Xpansiv CBL are attracting early interest from market participants, as a spectrum of pricing options become available in the non-CORSIA eligible voluntary carbon credits market.

A section of market participants track Xpansiv's two other standardized contracts – the GEO and the N-GEO – and price over-the-counter prices, accordingly.

The C-GEO contracts complement Xpansiv's N-GEO, which is based on Agriculture, Forestry and Other Land Use (AFOLU) credits, with underlying credits certified by Verra. The C-GEO contracts are based a wide range of underlying credits from various sectors, such as energy, renewables, and other technology-based offsets credits, except forestry credits.

The N-GEO contract comprises underlying Verified Carbon Standard/Climate, Community and Biodiversity Standard-certified credits.

"As liquidity picks up for C-GEO, there will be more incentive for traders to deliver a wider variety of qualifying credits through this standardized instrument," Russel Karas, head of carbon market development at CBL said. "More project types will then be pulled into C-GEO over time. However, whether C-GEO rises or falls in the near term is not really a function of the contract structure, but more about market wide supply and demand."

The C-GEO is a seller's option contract, and it was not unusual for some qualifying project specific credits to trade at a premium OTC, according to Karas.

The C-GEO-2 includes a rolling six-year vintage range 2016 onward. The contract will exclude the 2016 vintage credits from the middle of 2022, while including the 2022 vintages. The C-GEO-1 contract has an expanding vintage range for older credits no longer eligible for the C-GEO-2. The C-GEO-1 currently includes credits with vintages 2012-2015.

"The market is waiting to see whether the OTC offers will come to match the exchange prices, or whether the exchanges prices will increase to catch up with OTC," a trader said, referring to the C-GEO contracts.

Most sellers were not willing to drop prices, and more interest could move to the exchange as buyers search for value, the trader said.

N-GEO and C-GEO

S&P Global Platts reported the N-GEO contract offered at $17.00/t for 10,000 t volume Jan. 20. Platts reported VCS/CCB-certified credits of a similar volume offered at $17.50/mtCO2e for 2016 vintage credits OTC post 1200 GMT, Jan. 20.

The N-GEO contract was heard offered at $15.95/t for 3,000 t volume Jan. 18. It was also offered OTC at $16.00/t for an unspecified volume. Platts reported VCS/CCB-certified credits offered OTC at $16.50/mtCO2e for 50,000 2018 vintage credits Jan. 18. Platts did not report prices for VCS/CCB-certified credits post Jan. 20.

REDD+ credits were priced at a 20 cent premium to Xpansiv CBL's N-GEO spot contract Jan. 13. The Platts CNC, which includes prices from the exchanges, and the Platts Nature-based Avoidance Current Year, which reflects primarily OTC prices, had a narrow spread since Aug. 9, 2021.

The C-GEO-2 contract was offered at $6.90/t for 10,000 t volume Jan. 21. GS-certified non-CORSIA eligible renewable energy credits were offered at $8.80/mtCO2e for 250,000 mt of 2018-2021 vintages during the same period, according to sources.

The C-GEO-2 contract was offered in the $7.15-7.35/t range at volumes between 9,000-11,000 t Jan. 20. Three tranches of VCS-certified renewable energy credits of varying 2016+ vintages volumes were offered at $7.70/mtCO2e, during the same period, according to sources. Another tranche of 2014 vintage 100,000 credits were offered at $8.30/mtCO2e.

Gold standard certified credits in the OTC space were offered at higher prices of $9.00/mtCO2e and $10.90/mtCO2e. Gold standard-certified credits are not deliverable into Xpansiv CBL's contract and are typically priced at a premium to VCS-certified credits.

C-GEO effect

It was still early to ascertain the C-GEO 1 and C-GEO 2 contracts' impact on the market, sources said.

Most players were still not trading credits segments, such as non-CORSIA renewables, on exchanges, and were primarily trading OTC, unlike the forestry credits, which see a lot of activity on exchanges, a second trader said.

The trading volumes for the contracts could rise once they gain popularity, a third market source said.

"Right now, the contracts aren't trading much. But once traders see one another getting into it, others will get interested as well," the source said. "It's like if you're on a train and if you see someone on the seat next to you eating something, you are likely to order the same thing as well."