The Australian Securities Exchange (ASX) has launched three environmental futures contracts, marking a significant milestone for carbon and renewable energy markets in Australia and New Zealand.

Trading commenced on July 29 on the ASX 24 Market, featuring physically delivered large generation certificate (LGC), Australian carbon credit unit (ACCU) and New Zealand unit (NZU) futures.

These contracts are the first of their kind in Australia and New Zealand; and to encourage early engagement, the ASX has introduced a temporary fee waiver on all environmental futures transactions.

Australia’s carbon market is poised for significant growth and is expected to become one of the world’s largest producers of carbon credits in the coming years.

Recent data from Australia’s Clean Energy Regulator indicate that around half of all ACCUs are held in safeguard or safeguard-related entities’ registry accounts, a volume that could benefit from moving onto the exchange.

This initiative, the ASX argues, will help to build liquidity by attracting a diverse range of market participants and will enable participants to price and hedge emission reduction risks as they transition to a lower-carbon economy.

The exchange has designed the environmental futures in response to the growing demand for liquid and transparent carbon and renewables trading markets. That interest, the ASX notes, spans a broad and diverse customer base, including the energy sector, carbon project developers, compliance entities, financial institutions, trade houses and corporates.

“As Australia moves from a voluntary to compliance-led carbon market in step with other global jurisdictions, derivatives markets can play an essential role. ASX-hosted environmental futures will be a key instrument in managing risk and supporting the net-zero targets of organizations and policymakers," says Daniel Sinclair, the ASX’s head of commodities.

“A liquid and transparent environmental futures market will give organizations greater visibility and confidence to support ongoing investment in renewable energy and carbon abatement projects, ultimately mobilizing capital towards meeting longer-term emission targets.”

Registered participants can make or take delivery of underlying certificates or units at settlement, which can be surrendered to the government to offset emissions or meet compliance obligations. Each contract is standardized, representing 1,000 underlying LGCs, ACCUs or NZUs.