S&P Global proposes amendment to CME CBL carbon contract settlement methodology

S&P Global Commodity Insights is proposing to amend its Platts CME CBL GEO, NGEO and CGEO contract settlement methodology. In the event that trading volume on a specific contract exceeds 100 contract units, the new methodology will reflect a volumetric weighted average of transactions taking place over the final 10 minutes before market close. Each contract unit is representative of 1,000 environmental offsets. This note has been amended on April 4, 2022, to remove reference to trading at settlement (TAS).

S&P Global is proposing to make this amendment effective following the expiration of the May contract May 25, 2022, in response to rising open interest on the contracts. This would mean that the methodology change would take effect when the June contract becomes the front-month contract.

Currently, S&P Global assesses the CME CBL GEO, NGEO and CGEO futures by looking at the most competitive bids and offers shown through the NYMEX exchange at the time of the 2:30 pm ET New York close.

The current assessment process is explained in more detail in the Platts methodology available here: /content/dam/spglobal/ci/en/documents/platts/en/our-methodology/methodology-specifications/Method_Carbon_Credits.pdf.

Under the proposed new methodology, in the event of high trading activity ahead of the 2:30 pm ET close, S&P Global will instead take the volumetric weighted average of traded volume done directly through the exchange across the last 10 minutes ahead of the 2:30 pm ET New York close. This new methodology would only apply if 100 contract units or more are traded within the last 10 minutes of the close on an individual contract. Blocked-in trades would not be included as part of the total number of offsets.

Also, S&P Global is proposing to make this methodology change for non-settlement days only, meaning that the continued methodology whereby the most competitive bids and offers shown through the exchange would continue to take priority. S&P Global will continue to monitor activity to determine what additional changes may be needed as liquidity and open interest on the contracts continue to increase.

Please send all comments, feedback and questions to Platts_Carbon@spglobal.com and pricegroup@spglobal.com by April 15, 2022.

For written comments, please provide a clear indication if comments are not intended for publication by S&P Global for public viewing. S&P Global will consider all comments received and will make comments not marked as confidential available upon request.