ICE to launch UK carbon allowance options

“The launch of UK Carbon Options follows the successful launch of the UK carbon market last year and should provide a meaningful new tool for our customers to manage carbon emissions price risk,” said Gordon Bennett, Managing Director of Utility Markets at ICE. “Each day, ICE’s global environmental markets provide price signals for negative and positive externalities to help conserve the world’s carbon budget. Environmental considerations are touching a much wider spectrum of companies who will need to manage emissions pricing in their business models as part of their net zero commitments.”

ICE expects to list UKA Options out to March 2024. The underlying contract will be the December UKA futures contract for the relevant year. For example, the underlying contract for the March 2023 options will be the December 2023 UK Carbon Allowance future.

ICE launched UK carbon allowance futures in May 2021, alongside launching emissions auctions on behalf of the UK Government as part of the UK’s new emissions trading scheme. Each lot of UK Carbon Allowance futures is equivalent to 1000 UK Allowances where each allowance equals an entitlement to emit one tonne of carbon dioxide equivalent gas. Roughly 775 million tonnes of carbon dioxide equivalent gas have traded on ICE through the UKA contract since launch, while open interest has grown to the equivalent of approximately 47 million tonnes.

ICE has operated environmental markets for almost two decades. During this time, allowances equivalent to over 100 billion tonnes of carbon, over 250 million renewable energy certificates, three billion carbon credits, and the equivalent of over 1.7 billion Renewable Identification Numbers have traded on ICE, reflecting ICE’s role as the world’s leading environmental marketplace.