Demand to Price Climate Risk Drives Record Open Interest on ICE’s Environmental Complex
Intercontinental Exchange, Inc. (ICE) announced today that open interest across its environmental complex has achieved a new record, reaching approximately 2.65 million contracts, driven by increasing demand by participants to price climate risk.
ICE is a leading operator of global exchanges and clearing houses and a provider of mortgage technology, data and listings services. The environmental complex includes futures and options connected to ICE’s European (EUA) and California Carbon allowances (CCA), Regional Greenhouse Gas Initiative (RGGI) and renewable energy credits (RECs). According to ICE, companies subject to carbon cap and trade programs and renewable standards use the firm’s markets to meet obligations and manage risk in the most cost-effective way, while policy makers rely on price signals from environmental markets, such as those traded on ICE, to gauge the effectiveness of their programs and ensure desired outcomes.
The company also noted that the number of participants trading ICE’s carbon markets has grown by more than 40% since 2017, with North American participants increasing by more than 70%. Additionally, the number of participants trading both European and North American carbon markets at ICE has grown by approximately 85% since 2017.
Gordon Bennett, Managing Director of Utility Markets at ICE, said:
“Liberalized markets are critical to the energy transition as they enable competition between energy sources and in doing so help change behavior by attributing a cost to pollution. This record activity, coupled with the growth in the number of participants trading these markets, reflects the fundamental role market-based mechanisms like carbon cap and trade schemes play in pricing climate risk.”