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CME Group – Voluntary Emissions Markets
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Market based mechanism for carbon emissions

Mandatory  Allowance for producing less emissions

• Countries implement an Emission Trading Scheme (ETS)

• Define an emission reduction target over a period

• Decide which type of industry are covered

• Allowances are emitted and allocated

• ETS are “Cap and Trade” mechanism

Some form of Emission Units might be accepted for offset (CER)

Main ETS: Trading volume (2020):

Voluntary  Credit (Unit) for removing emissions

Emission Units are issued from specific projects or programs 

reducing GHG emissions.

These Units can be traded and purchased by firms to offset 

emissions they generate.

First introduced by the Kyoto Protocol and implemented under 

the Clean Development Mechanism (CDM) in the form of 

Certified Emission Reduction (CER)

Other Emission Units can be issued for projects registered by 

other entities than the UN-based CDM.

Units traded in the voluntary market are a key mechanism to 

achieve carbon-neutrality.

Example of Emission Units:

Market-based mechanisms for carbon emission are taking place in Mandatory and Voluntary markets.

ETS Allowance Start

EU ETS EUA 2005

New Zealand ETS NZU 2008

California ETS CCA 2012

Korea ETS KAU 2015

China ETS - 2021

10.3 billion allowances* –

each worth 1 tone of CO2. 

$272 billion*

EU ETS: 90% of global value 

and most of the total market 

trading volume*.

Program Unit

Clean Mechanism Development (CDM) CER

Verified Carbon Standard (VCS) VCU

China GHG Voluntary Emission Reduction Program CCER *Sources: Refinitiv
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State of Voluntary Emissions Market 

• UN Race to Zero campaign

- 2,162 businesses

- 127 countries 

- 708 cities 

- 25% global CO2, over 50% GDP

• How can they satisfy these pledges?

- Remove/cut emissions

- Negative emissions 

• Taskforce on Scaling Voluntary Carbon 

Markets

- 15-fold scale-up needed by 2030 vs 2019, maybe 

more

- One of Six Key Areas of Focus: 

CORE CARBON REFERENCE CONTRACTS

Source: Ecosystem Marketplace

Historical Voluntary Offset Transaction Volumes 
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• Background 

- Adopted by ICAO in 2016

- Carbon neutral growth beyond 2020 from international 

aviation 

- Global aviation emissions account ~2% global emissions

- Projected to mitigate 2.5 billion tons of CO2E 

• Structure

- Technical Advisory Body (TAB)

- Eight approved Registries

- Rolling Applications 

• Phases 

- Pilot 2021-2023

- First Phase 2024-2026

- Second Phase 2027-2035

CORSIA

Carbon Offsetting and Reduction Scheme for International Aviation 
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• Physical contract – Seller’s option 

• Longer term hedge without delivery 

- Roll position 

- Exit position 

- Exchange for Physical (EFP)

• Emission reduction goals

- Emerging hybrid approach - 80/20 Rule 

• Carbon neutral commodities 

- Pair with existing commodities during transition 

Global Emissions Offset (GEO) Futures
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What is a “carbon-neutral” cargo?

The “carbon-neutral” denomination does not mean that a cargo does not cause any emissions, but rather that the carbon emissions have been offset through the purchase of 

credits from carbon removal projects.

Based on the Greenhouse Gas Protocol which represents the most widely used GHG accounting standards, lifecycle GHG emissions can be divided and measured according to 

three “scopes” (Scope 1, 2 and 3): 

• Scope 1 emissions are direct emissions from owned or controlled sources. 

• Scope 2 emissions are indirect emissions from the generation of purchased energy. 

• Scope 3 emissions are all indirect emissions (not included in scope 2) that occur in the value chain of the reporting company, including both upstream and downstream 

emissions. 

Many firms have already transacted “carbon neutral’ cargoes in the LNG and more recently in the crude oil market.

Source: https://giignl.org/sites/default/files/PUBLIC_AREA/giignl_lng_carbon_offsetting_061820.pdf

Date Seller Buyer Arranging 

Bank Tanker Delivery Source of Certificates Scope covered

Press 

Release

Jun-19 Shell Tokyo Gas LNG Japan From Shell project portfolio 1, 2 & 3 link

Jun-19 Shell GS Energy LNG South Korea From Shell project portfolio 1, 2 & 3 link

Jun-19 JERA LNG India CER 3 link

Mar-20 Shell CPC LNG Taiwan From Shell project portfolio 1, 2 & 3 link

Oct-20 Total CNOOC LNG China VCS 1, 2 & 3 link

Mar-21 Mitsui Hokkaido Gas LNG Japan From Mitsui portfolio 1, 2 & 3 link

Mar-21 Gazprom Shell LNG U.K VCS 1,2 & 3 link

Mar-21 RWE POSCO LNG South Korea Gold Standard link

Apr-21 DGI Toho Gas LNG Japan

Aor-21 Pavilion LNG Singapore VCS, CCB link

Jan-21 Occidental Reliance Macquarie Crude oil India VCU through CBL platform 1, 2 & 3 link

Mar-21 Woodside Trafigura Condensate Gold Standard, VCS link

Apr-21 Trafigura Braskem Naphtha Brazil VCS (nature-based) link
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• Anchor with GEO 

- Project type

- Geographic region

- Community benefits 

• Existing commodities markets 

• Spot pricing, follow by futures 

Evolution - basis markets 
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Disclaimer

Neither futures trading nor swaps trading are suitable for all investors, and each involves the risk of loss. Swaps trading should 

only be undertaken by investors who are Eligible Contract Participants (ECPs) within the meaning of Section 1a(18) of the 

Commodity Exchange Act. Futures and swaps each are leveraged investments and, because only a percentage of a contract’s 

value is required to trade, it is possible to lose more than the amount of money deposited for either a futures or swaps position. 

Therefore, traders should only use funds that they can afford to lose without affecting their lifestyles and only a portion of those 

funds should be devoted to any one trade because traders cannot expect to profit on every trade. 

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The information within this communication has been compiled by CME Group for general purposes only. CME Group assumes no 

responsibility for any errors or omissions. Additionally, all examples in this communication are hypothetical situations, used for 

explanation purposes only, and should not be considered investment advice or the results of actual market experience. All matters 

pertaining to rules and specifications herein are made subject to and superseded by official CME, CBOT, NYMEX and COMEX 

rules. Current rules should be consulted in all cases concerning contract specifications. 

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