Climate Impact X to Mark Step Change in Carbon Contract Performance and Price Transparency With Global Nature-Based Benchmark

Climate Impact X (CIX), a global marketplace, auctions house and exchange for trusted carbon credits, is set to launch a nature-based standardised contract in the company’s upcoming spot trading platform, CIX Exchange.

CIX Nature X (‘Nature X’), which will trade under the contract code CNX, is innovatively designed to address key market concerns over project delivery risk, market-representative pricing and fragmented liquidity in the voluntary carbon market. Validated through extensive industry consultation, Nature X will deliver a market-driven price benchmark, with enhanced transparency benefitting the industry at large.

At launch, Nature X represents a curated delivery basket of 11 large, well-established and globally-accepted carbon credit projects that support Reducing Emissions from Deforestation and Forest Degradation, the conservation and sustainable management of forests, and the enhancement of forest carbon stocks (REDD+).

Combined, these 11 projects from across the Americas, Africa and Asia account for close to two-thirds of all global REDD+ market volumes. At launch, Nature X will contain four tradable contracts, each representing credit vintages over a fixed period of four years between 2016 and 2022.

Nature X has been curated to be precise enough to ensure confidence and certainty in the project credits delivered, while remaining broad enough for ample liquidity and to mitigate any potential concentration risk or sudden market or regulatory developments. Each lot of CNX equates to 1,000 carbon credits, where each credit represents one tonne of reduced or avoided carbon dioxide from the verified projects.

Tom Enger, Head of Product at CIX, said, “As the largest single category of voluntary market carbon credits today by volume of credits issued and retired, REDD+ is an essential part of global decarbonisation, and will serve long-term as a critical marker for all nature-based credits. CIX has developed with broad industry support a clear and simplified contract mechanism for on-exchange transactions, together with best practice contract governance to provide stability. These elements are cornerstones for a robust spot market, which in turn is fundamental for funnelling investment, confidence and new participants into the carbon market to help it scale.”

In curating projects for contractual delivery into Nature X, CIX considers the size of a project by volume of issued and unretired credits; the recognition of a project among active market participants and by independent carbon rating agencies; and its level of traded activity in the spot market. Qualifying projects should also not show specific characteristics which adversely affect their tradability, broad market acceptability or price.

A more focused delivery selection improves contract fungibility, reduces market information asymmetry and mitigates distortive price signals that can occur when sellers have a wide choice of deliverable projects, and when buyers have less familiarity or resources for active due diligence on many new projects globally. CIX’s curated contract basket and a prompt benchmark contract for vintages of 2019-2022, enables a daily global pricing benchmark that is more tightly representative of the market value of leading nature-based projects.

Julien Hall, Pricing Director at CIX, said, “CIX is creating a more fungible spot contract, reducing the risk of buying and selling recently issued credits, and ultimately enabling more market participants to transact with confidence and accuracy. Bids, offers and trades of the Nature X contract by core market participants in a concentrated daily trading session will shine a clear light on market value. This nexus of price formation and liquidity underpins a robust and representative nature-based spot benchmark, which should build confidence in fairly-priced project differentials, forward contracting and ultimately futures.”

Nature X’s delivery basket is designed to evolve over time in response to market conditions, ensuring ongoing relevance, contract integrity and transparency; and hereby the contract remains representative of the market while also catering for future market scaling. Contract changes will be made in accordance with CIX’s robust governance process, using international best practice, and through open consultation with the market, to ensure benchmark stability.

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