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A National Government’s Need for a Carbon Registry and Auction Platform

A National Government’s Need for a Carbon Registry and Auction Platform

Climate change is the greatest long-term threat that we face as a global community. In response, many countries are submitting enhanced Nationally Determined Contributions (NDCs) to the United Nations, committing to cut greenhouse gas (GHG) emissions by 2030. In some cases, an NDC submission outlines a series of investments, regulations and measures that a country is taking in pursuit of its ambitious target.

The energy and environmental department at this national-level government wanted to create a price incentive for industries to reduce their GHG emissions and stimulate investments in green innovation. They also wanted to do this while reducing the risk of facilities moving to other regions to avoid paying a price for polluting. Today, industries in the country that are covered by the federal carbon pricing system have an emissions limit. If they are above this limit, they will need to pay the carbon price or use certain credits.

In order to support this effort, the department needed a way to enable market participants to track, manage and trade GHG credits, while helping the government verify actual emissions reductions.

Pain Points

Team members at the energy and environmental department needed a secure, web-accessible platform that would support registration, credit creation, auctions and other activities. They had very specific criteria and, in particular, wanted:

  • A well-tested registry for administering the country’s compliance carbon program, plus voluntary programs as they emerge.
    • Unique serial numbers to ensure that all reductions are properly accounted for and to avoid double counting.
    • A regulator user role with administrative oversight of accounts, activities/projects and credits.
    • Credit tracking from issuance to transfer to cancellation or retirement.
    • Easy online access for market participants to see credits available for sale, with indicative quantities and prices.
    • A link to exchanges, other trading/clearing platforms and a meta-registry to promote liquidity in the market.
  • An auction capability with functionality for enrollment, bidding, price calculation and results generation, as well as connectivity interfaces to other platforms as needed.
    • Easy account on-boarding and know-your-customer (KYC) checks.
    • Algorithm/calculation of settlement prices, with publication of auction results and configurable floor price, unit type, vintage and entity bidding limits.
    • Integration capabilities with the registry for electronic position settlement and/or with an exchange for the clearing/financial settlement process.
  • A comprehensive picture of prices as background intelligence for department staff to capture:
    • Individual attributes of particular projects that factor in standard certification, volume and vintage.
    • Geographic considerations, which can play an important role in the final price.
  • Additional intelligence for staff on carbon market developments around the world.

Team members knew that IHS Markit was now part of S&P Global and contacted S&P Global Sustainable1 (“Sustainable1”) to discuss the firm’s capabilities for carbon markets. Sustainable1 brings together capabilities from across the enterprise to serve as a single source of essential sustainability intelligence.

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The Solution

Specialists from Sustainable1 described a wide range of capabilities that would help members of the energy and environmental team white label a sophisticated registry and auction platform and keep their pulse on carbon markets around the world. This included solutions from:

  • S&P Global Commodity Insights. As of March 2022, IHS Markit became part of S&P Global, and S&P Global Platts and IHS Markit Energy & Natural Resources combined to become S&P Global Commodity Insights.
  • S&P Dow Jones Indices.
  • S&P Global Trucost, the data and analytics engine of Sustainable1.

Together, these capabilities would enable the team to:

Key Benefits

Members of the energy and environmental team were impressed with the functionality of the registry and auction offering, and engaged with Sustainable1 to white label capabilities to support the country’s carbon pricing mechanism. They were also interested in tracking carbon markets around the world to stay on top of developments, market growth and industry best practices. Today, they are benefiting from having:

  • A well-tested and secure registry platform with extensive functionality to efficiently manage carbon credits.
  • The ability to participate in the Carbon Meta-Registry to connect with other registries around the world to help reduce the risk of double counting and double claiming.
  • An auction capability from a leading provider that builds on existing expertise in collecting, processing and distributing content, as well as experience with auctions in the water marketplace.
  • Relevant insight into the trends that shape carbon markets across a large range of project types, geographies and standards.
  • Pricing, rationales, market commentary and news for both the compliance and voluntary markets.
  • A transparent view of the rapidly growing voluntary carbon markets, with a suite of benchmark voluntary carbon prices covering a full range of projects.