Introduction to Carbon Unit Exchange
Information about the carbon unit exchange is of interest to various groups of readers, who are offered the following materials for additional study:
- For potential buyers: material on purchasing carbon units.
- For potential sellers: material on selling carbon units.
- For climate project initiators: material on the general principles of implementing such projects.
There are the following options for selling carbon units:
- Independent search for buyers;
- Sale through an intermediary;
- Sale through the exchange
- commodity auction
- organized trades
Exchange advantages:
Access to a wide range of potential buyers, increasing the chances of a profitable sale.
Transparency, as prices for carbon units are formed openly and competitively.
Exchange disadvantages:
- Exchange fees.
- Procedure complexity compared to independent buyer search or intermediary services.
Sale on the exchange in the form of a commodity auction
There is no separate exchange for trading carbon units in Russia. This function is performed by the commodity exchange, allowing carbon units to be admitted to exchange trading in accordance with the specifications of exchange goods.
Main characteristics of the commodity auction market:
- One-sided auctions: Trading is conducted in the format of one-sided auctions, where participants offer their prices for goods.
- Auction participants: Companies with the status of “Auction Customer” organize auctions. Companies with the status of “Auction Participant” can participate in them.
- Conclusion of contracts: Contracts of sale are concluded between the organizer and the winner/winners of the auction.
- Absence of clearing and settlements: The exchange does not conduct clearing and settlements for concluded contracts. This means that the parties themselves carry out payment and delivery of goods without using the exchange infrastructure.
- Bilateral mode: Parties that have concluded an exchange agreement fulfill obligations for payment and delivery in a bilateral mode, bypassing the exchange infrastructure.
Screenshot from the website of the National Commodity Exchange https://www.namex.org/ru/commodityauctions
Completed transactions
At the time of writing this article (13.03.2024), commodity auctions for carbon units were held twice, and four deals were concluded as a result.
In September 2022, 20 carbon units were first sold on the National Commodity Exchange, with two deals for 10 carbon units each at a price of 1000 rubles each.
The next trades were conducted by the same exchange in November 2023, with two deals for 2000 and 735 carbon units at a price of 700 rubles per unit.
The current information on transactions with carbon units (including exchange ones) is provided in the table at the link.
Sale on the exchange in the format of organized trades
Organized trades as the basis for the transfer of carbon units between participants in circulation are mentioned in paragraph 59 of the Resolution of the Government of the Russian Federation dated 30.04.2022 No. 790 “On approval of the Rules for the creation and maintenance of the registry of carbon units, as well as the conduct of operations with carbon units in the registry of carbon units”.
In a standard agreement approved by the Resolution of the Government of the Russian Federation dated 20.05.2022 No. 905, the procedure for conducting operations on an account in the registry of carbon units related to the execution of transactions with carbon units concluded at organized trades is determined. The registry operator has additionally developed procedures for interaction at organized trades with the Client and with the Trade Organizer.
Organized trades with carbon units consist of the following stages:
- Preparation: The Client (Seller) concludes an agreement with the trade organizer (in this case, the exchange). The registry operator of carbon units allocates to the exchange a specific quantity of carbon units belonging to the seller, indicating their numbers. Conducting trades:
- The exchange conducts trades for the sale of carbon units. Based on the results of the trades, a registry of contracts is formed. Transfer of carbon units:
- Based on the registry of contracts, the registry operator transfers carbon units from one account to another in the registry.
The list of exchanges that have concluded an agreement with the registry operator for the conduct of organized trades is published on the official website at the link.
At the time of writing this material, exchanges have not yet concluded such agreements.
Future of carbon unit exchange trading
It can be predicted that with the increasing demand for carbon units, exchanges will play a significant role in organized trades. The potential of exchanges in this direction:
- Development of standardized contracts to ensure comparability and liquidity of carbon units.
- Participation in clearing and settlements for transactions.
- Provision of public data on prices, trading volumes, and other market indicators
