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Intercontinental Exchange, Inc. (NYSE:ICE), a leading global provider of data, technology, and market infrastructure, today announced record volume and participation in its North American environmental markets, with a record 270 companies trading last year.
ICE offers customers the most liquid markets to trade futures and options on California Carbon Allowances, California Carbon credits, RGGI Allowances (RGA), California Low Carbon Fuel Standard (LCFS) Credits, and Renewable Energy Certificates (RECs). Across the portfolio, a record 3.64 million contracts traded last year, a 5% increase over 2021, with average daily volume increasing 5.5% to 14,500 contracts.
Approximately 372 million carbon allowances went to delivery through ICE in December 2022, of which North American carbon allowances accounted for 28%, at a notional value of $2.5 billion.
Volumes across ICE’s renewable energy certificate futures markets grew by 40% last year. A REC certifies that the megawatt of electricity generated is from renewable energy. ICE offers 31 REC futures and options including wind and solar RECs. A record 981,302 REC contracts traded last year, equivalent to an estimated 87.6 million megawatt hours of renewable energy. More than two thirds of REC volumes related to PJM Tri REC futures for the Pennsylvania, New Jersey, and Maryland renewable portfolio standard programs, which define the percent of electricity generated by renewable resources that must be sold in states over a specified period.
“Net zero is predominantly an energy transition. The price signals and liquidity of energy and environmental markets are at the heart of helping companies transition to alternative forms of energy by providing the tools to allocate capital and manage the associated price risk,” said Gordon Bennett, Managing Director of Utility Markets at ICE. “The transition to renewable electricity means RECs are integral to any company wishing to comply with their emission reduction commitments, as well as a key hedging tool to reduce the price risks of balancing supply and demand for renewables.”
LCFS represents a fast-growing carbon credit market connected to California’s program to reduce the carbon intensity of transportation fuels sold, supplied, or offered for sale in the state, and provide low-carbon and renewable alternatives. A record 5.67 million LCFS credits traded on ICE last year, over five times the volumes in 2021. LCFS credit futures reached record volume, open interest, and participation in January 2023.
Meanwhile in RGA, which represents the fourth largest carbon allowance futures market in the world, a record 406,876 futures and options contracts traded in 2022, an 18% increase versus 2021.
Expanding its range of cap-and-trade futures markets available, ICE plans to launch Washington carbon allowance futures, subject to completion of regulatory processes. Washington’s “Cap-and-Invest” program, which began on January 1, 2023, is closely modeled on California’s carbon market, has an initial cap of 63.3 million tons, and will over time cover 75% of Washington’s carbon dioxide emissions.
“Companies operating under cap-and-trade programs are required to treat their emissions as liabilities, creating demand for carbon allowances to pay for the pollution they emit, and incentivizing companies to seek lower cost abatement opportunities. With the scope of the European Emissions Trading Scheme set to increase by approximately another 1.5 billion tons under the EU’s Fit for 55, the number of emission liabilities at risk is set to nearly double to exceed 4 billion tons, increasing demand for environmental risk management tools”, continued Bennett.
ICE has been a leader in global environmental markets for almost two decades and hosts the four largest and most liquid carbon cap and trade markets in the world. Since launch, allowances equivalent to over 100 billion tons of carbon, over 250 million renewable energy certificates, 3 billion carbon credits, and the equivalent of over 3 billion Renewable Identification Numbers have traded on ICE.
