Title: Xpansiv’s Carbon Market Review: Trading Insights from 2022

Language: English

Type: Blog/Article

Nature: Website

Published: March 1, 2023

Region: Global

Country: Global / Non-Specific

Topic: Emission Reduction Program

Keywords: Dubai, United Arab Emirates

Document Link(s):

Document Summary:

The Xpansiv’s Carbon Market Review: Trading Insights from 2022.

Document Details:

2022 was a turbulent year for global financial and commodity markets. The voluntary carbon market (VCM) was no exception. The Russian invasion of Ukraine and broader macroeconomic conditions drove many VCM market participants to pursue risk-off strategies, slowing CBL trading volume by 32% year-over-year in the second half of 2022. VCM-specific metrics also saw a decline, with issuances down 6% on prior year, while the pace of retirement increases slowed to 2% annual growth amid increased publicity around carbon credit integrity (Trove Research).

Despite the negative macro trends, the VCM proved to be resilient, and it continued to evolve in terms of market structure development. Trading of spot standardized contracts increased by 97% volumetrically providing price clarity and liquidity that were previously unavailable. CME Group’s CBL emissions futures volume jumped 345% reflecting strong market adoption of the contracts to manage price risk efficiently within a regulated contract market. Basis markets linked to standardized contracts emerged, providing additional price signals for bespoke segments of the market.

This report examines some of the major trends of the past year via data generated from Xpansiv’s spot market, CBL, to provide a clear picture of the evolution and maturation of the VCM.

Updated: November 7, 2023