The Australian Securities Exchange (ASX) has opened its first environmental futures contracts, as it attempts to bring liquidity to the region’s carbon markets. The contracts cover three separate regulated markets: Large Generation Certificates (LGCs), which are generated when Australian utilities produce power from renewable sources; Australian Carbon Credit Units (ACCUs), which are carbon credits issued for activities like tree planting, savanna burning and soil carbon; and New Zealand Units (NZUs) – carbon allowances provided under that country’s emissions trading scheme. Each unit or certificate represents one tonne of carbon dioxide. The new futures contracts have been standardised, with each equalling 1,000 underlying LGCs, ACCUs or NZUs. The ASX said it would temporarily waive transaction fees to encourage participation and help build liquidity. “As Australia moves from a voluntary to compliance-led carbon market in step with other global jurisdictions, derivatives markets can play an essential role,” said ASX Head of Commodities Daniel Sinclair. “The transition to clean energy, by definition, is uncertain, and ASX-hosted Environmental Futures will be a key instrument in managing risk and supporting the net zero targets of organisations and policymakers.” Greater liquidity and the ability to hedge risk will encourage more investment to flow into Australia and New Zealand’s renewable energy and climate change mitigation programmes, Sinclair added.
