Climate Impact X to launch price benchmarking contracts for cookstove projects
Wong Pei Ting
CLIMATE Impact X (CIX) will launch a new series of carbon price benchmarking contracts that are based on improved cookstove projects in the coming months.
The Singapore-based carbon exchange and marketplace announced the move in a press statement on Tuesday (Sep 5).
Cookstove projects are those that work with communities in developing countries, including Laos, Vietnam, India, Nepal and Bangladesh, to cut their reliance on solid fuels like firewood or charcoal, avoiding carbon emissions in the process.
The move comes three months after CIX launched its first standardised carbon contract, Nature X, which represents a curated delivery basket of 11 projects that support reducing emissions from deforestation and forest degradation in developing countries.
Nature X has since marked over 120 transactions, with an average daily bid-offer spread of just under nine US cents, while “significantly” increasing daily price transparency of the forest conservation-type projects, noted CIX, a joint venture among DBS, Temasek, Standard Chartered and the Singapore Exchange.
With the new cookstove contracts, to be called Cookstoves X, plans revealed by CIX showed a deviation from its previous approach, which was to use its heavy curation of projects to set a global price for leading nature-based projects.
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For cookstoves, it intends to launch four contracts that collectively cover the vast majority of the cookstoves market. A total of 31.6 million credits are eligible for delivery into its contracts. In its statement, CIX pointed out that these were designed following broad industry consultation, with an aim to “streamline the market”.
Cookstove projects’ scaling potential was impeded by market complexity brought about by the sheer volume of projects that exists globally, fragmented liquidity and pricing opacity.
CIX’s solution is to split the projects into four segments based on two factors – project location (whether they are from least developed countries or developing countries), and registry (whether they were verified by Gold Standard or Verra).
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Its head of product Tom Enger said the approach can sharpen the valuation of comparable registry crediting schemes and location attributes.
This time round, CIX also placed greater emphasis on liquidity concentration. The cookstove credits would get its first-of-a-kind on-exchange spot pricing session which concentrates trading activity within a weekly 30-minute window, instead of daily for Nature X.
This means buyers and sellers of such carbon credits can meet at a set time each week; CIX has set this at every Tuesday at 5 pm to 5.30 pm, Singapore time.
This is meant to generate sharper market prices. CIX’s pricing director Julien Hall said by concentrating liquidity in better-defined and tradeable contracts, the exchange aims to help enable the next wave of demand through greater price transparency and confidence in decision-making.
But like Nature X, each Cookstoves X contract will come with 1,000 carbon credits, where each credit represents one tonne of avoided emissions from the verified projects.
Also, credits eligible for delivery into Cookstoves X will be issued within a fixed four-year vintage range, starting at launch with vintages 2020-2023. CIX creates new contracts each year on the first working day of January, reflecting the most recent four-year vintage range.
CIX said credit issuances for cookstove projects are expected to rise in the coming years, driven by the urgency to meet the United Nations Sustainable Development Goals by 2030, since clean cooking directly supports 10 of the 17 goals.
Price reporting outfit Quantum Commodity Intelligence last assessed the price of clean cookstoves offsets to be US$4.20 each, falling from US$10.50 on Dec 5, 2022, nine months ago.
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