SINGAPORE-based Climate Impact X (CIX) launched its voluntary carbon exchange on Wednesday (Jun 7), hitting a key milestone in its ambition to be a global price setter.

CIX branded its first standardised carbon contracts under the Nature X label. Each contract represents 1,000 carbon credits from a curated pool of 11 large and well-recognised forest conservation projects, and are distinguished by the credits’ vintages – the years in which the credits were issued.

The projects are all aligned with the Redd+ framework, which lists projects that not only reduce emissions from deforestation and forest degradation in developing countries, but also adhere to sustainable forest management and carbon stock conservation and enhancement.

CIX chief executive Mikkel Larsen said that the launch “completes the build of (CIX’s) core venues”. After its creation in May 2021 by DBS : D05 0%, Singapore Exchange (SGX : S68 0%), Standard Chartered (StanChart) and Temasek, CIX launched an auction platform in November 2021, followed by a marketplace in March 2022. The exchange allows CIX to cater to the widest range of end-user, investor and intermediary needs in the carbon market, Larsen added.

On Wednesday, the most current contract – representing 2019 to 2022 vintages – ended the session with a volume-weighted average price that works out to US$5.36 per carbon credit. That was based on seven transactions totalling 12,000 carbon credits. CIX did not provide closing prices, but said bids and offers converged to a few cents’ difference.

CIX is banking on Nature X to capture enough liquidity among global voluntary carbon credit traders to become a market benchmark for Redd+ credits.

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The selection of projects that are included in the Nature X basket are a key feature. CIX head of product Tom Enger told The Business Times (BT) that the projects picked for the contracts are “well-recognised” enough that traders and bankers are “not afraid to buy, or routinely buy” them.

The 11 projects are among the largest Redd+ projects in the world, accounting for close to two-thirds of global Redd+ volumes. South-east Asian projects in the basket are Cambodia’s Southern Cardamom and Keo Seima Wildlife Sanctuary projects and Indonesia’s Rimba Raya Biodiversity Reserve Project. Larger projects have better risk management and co-benefit qualities, Enger said. 

“That’s natural because big project developers have more funds,” he added. “They pack in more sustainable development goals, social benefits, biodiversity benefits.”

The CIX Exchange will also list credits from 34 single nature-based projects, including the 11 in the Nature X delivery basket. This will enable traders who take delivery of a Nature X contract to unbundle the underlying credits and sell them individually. Such an avenue could provide a way to discover the pricing differentials among the different credits in the basket and specific project brands, CIX said.

The Nature X prices could also be used to guide the prices of other nature-based products.

Carbonplace chief executive officer Scott Eaton told BT: “Prices for credits traded using reference contracts could work as a starting point for the negotiation of these over-the-counter trades, with other attributes still being priced separately.”

DBS chief sustainability officer Helge Muenkel said that well-run carbon exchanges that facilitate the buying and selling of trusted carbon credits are essential to a low-carbon future. “Carbon credits, when used as part of a credible science-informed decarbonisation strategy, can be a powerful tool to unlock capital for the financing of climate mitigation solutions and activities at scale,” he noted.

Gerald Prolman, chief executive of Everland – which represents a portfolio of forest-conservation projects, including some in the Nature X basket – added that CIX’s moves are critical to building buyer confidence around high-integrity Redd+ projects. Improved confidence could generate sustainable revenue streams to communities on the front lines of the climate crisis.

“These communities need reliable alternative sources of income over the long term to create the right incentive to preserve and protect our forests,” he said. “That is the only way to ensure a tree is not worth more dead than alive.”

CIX Exchange trades between 12 pm and 6.30 pm, Singapore time, Mondays to Fridays, except Singapore public holidays. To concentrate liquidity from Asia, Europe and the Middle East, the exchange has set 5 pm to 5.30 pm as a “liquidity window”. CIX said that this is expected to have the effect of sharpening benchmark prices and improving order depth.

CIX pointed out that the market participants on the first day of operations include major financial institutions, trading houses and corporate end-users, namely Carbon Growth Partners, DBS, Hana Securities, RWE Supply & Trading, South Pole, Viridios Capital and Vitol Asia.

The first trades were executed by Chevron (International) Trading, CICC Commodity Trading, Engie Energy Marketing Singapore and StanChart.

Chevron’s supply and trading president John Kuehn said, in a statement provided by CIX, that the US energy giant sees its participation in CIX’s new spot exchange as helping it meet its carbon reduction goal with a portfolio of credible, verifiable, and sustainable credit units.