Today is Monday, November 13, 2023.
A few days ago, ACX (AirCarbon Exchange), pioneer in Singapore Asia, announced ACX Abu Dhabi, its newest exchange and clearing house in Abu Dhabi Global Market (ADGM). As you may know, Abu Dhabi is the capital of the United Arab Emirates (UAE) while Dubai, host of COP-28 in a few days, its most populous city and international hub.
According to the press release, "In September 2022, ADGM, the international financial centre of the UAE’s capital that is established as a financial free zone, became the first jurisdiction to regulate voluntary carbon credits as financial instruments through the introduction of an Environmental Instrument classification, a regulatory framework to license exchanges and clearing houses for both spot and derivatives markets for these products."
You can refer to the regulation itself, final part of the document, were it is mentioned:
"In this Regulation an “Environmental Instrument” is a Financial Instrument that is recognised by the Regulator which:
(a) enables its holder to emit greenhouse gases into the atmosphere, in accordance with any emissions trading scheme (i.e. emissions allowances or equivalent);
(b) attests to the reduction or removal of greenhouse gases into the atmosphere (i.e. carbon credits or equivalent); or
(c) attests to the environmental attributes of an underlying unit (i.e. renewable energy or environmental attribute certificates)."
Meanwhile, key trades have already been executed and settled on the ACX platform, signifying the "commencement of what is anticipated to be a burgeoning market for voluntary carbon markets (VCM)".
The inaugural carbon credits trade on the exchange was executed between First Abu Dhabi Bank (FAB) and specialist carbon trading company Helix Climate.
The press release also mentions the first trade on the Carbon Market Board – an electronic trading facility that allows participants to execute and settle over-the-counter transactions. The trade was concluded with South Pole, the world’s leading climate project developer and solutions provider. South Pole was also on the midia a few days ago, but for other reasons.
Last but not least, ACX has been regularly issuing a "Watch Report". Here some information quoted from the last one:
(1) Prices on the exchange remain unchanged this week due to an overall slowness in the VCM.
(2) Over the years, the run up to COP has typically reflected lower volumes traded as market participants anticipate announcements that may impact the market.
(3) With ongoing scrutiny on projects and methodologies, and recent criticism of a well-known REDD project in particular, buyers’ confidence in the market remains diminished, with credit prices dipping as a result. Nonetheless, some market participants are still demonstrating interest in high quality REDD projects preferring to engage in project specific transactions to reduce reputational risk.
(4) Brazilian REDD credits have also been reported trading at a discount compared to other countries. ARR projects, on the other hand, are still trading at a premium compared to other nature-based solutions, with buyers valuing more those ARR projects that use native species as they tend to have increased co-benefits on biodiversity.
(5) The market is anticipating decisions around compliance markets which may provide some of the much necessary guidance and confidence to buyers in the VCM. Participants are waiting for clarity on eligibility requirements for the first phase of CORSIA.
(6) In addition, with COP28 just around the corner, decisions around Article 6 of the Paris Agreement will undeniably have an effect on carbon markets, with the VCM and the compliance markets increasingly intertwining.
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Click at the image below for the full press release about ACX Abu Dhabi.
