In certain ETS systems, a proportion of these allowances may be freely allocated by the authorities to the covered companies to ease their energy transition. However, it is also common that the entities have to buy the full obligation for each compliance period. Through this market-based mechanism, ETS systems create an economic incentive for companies to reduce emissions.
Through its subsidiaries Vertis Environmental Finance (“Vertis”) in Europe and STX LLC in North America, STX Group has a track record of over 25 years trading in emission allowances. Vertis operates as an independent regulated entity, authorized to trade EU emission allowances (EUAs), which are designated as financial instruments under the MiFID II regulatory framework in Europe. STX North America is an active authorized entity trading California and Quebec Cap and Trade instruments (CCAs & CCOs), Washington Carbon Allowances (WCAs), and Regional Greenhouse Gas Initiative Allowances (RGGI). In addition to being active in ETS Markets, STX also operates in the Voluntary Carbon Markets.
In 2022, ETS markets reached a record €850B ($909B), with the largest by far being the European Union (EU) ETS at €751B. However, their popularity continues to grow as a powerful policy instrument with established markets in several countries and states, including the United States, China, South Korea, Australia, and New Zealand.
Interested in European ETS Markets?
Interested in Voluntary Carbon Markets?
STX’s role in global ETS Markets
STX is an active principal trading firm engaged in global ETS markets with direct access to major exchanges, including ICE, EEX and NODAL. Boasting sophisticated trading capabilities and extensive access to market participants, we can offer transactional liquidity to assist regulated entities in meeting their obligations.
Our involvement:
- Buy or sell emission allowances with SPOT, Forward, Option and SWAP contracts,
- Provide relevant market insights on trends in trading activity,
- Develop unique compliance plan to hedge price risk and identify abatements costs.
- Provide regulatory and compliance guidance to market participants.
STX’s role by region
California
California Cap
& Trade Program
The state of California and the province of Quebec have implemented economy wide programs that require all emitting entities that exceed a threshold of 25,000 metric tons of GHGs within the respective jurisdictions to procure and surrender carbon allowances per ton emitted.
The California and Quebec programs have been linked since 2014 allowing mutual acceptance of compliance instruments (CCAs & CCOs) across the two jurisdictions.
Environmental Commdodities:
- California Carbon Allowance (CCA)
- California Carbon Offset (CCO)
Washington
Washington Cap
& Invest Program
The State of Washington recently established a “cap & invest” program following the passage of the Climate Commitment Act of 2021. This market-based mechanism imposes a cap on the total annual GHGs emitted by entities that exceed the 25,000 metric ton threshold. The Washington program is not currently linked with those of California or Quebec.
Environmental Commdodities:
- Washington Carbon Allowance (WCA)
Northeastern US
Regional GreenhouseGas Initiative (RGGI)
RGGI consists of a coalition of ten active states in the Northeastern US, which have adopted a model rule designed to cap and reduce power sector emissions. The RGGI program is sector-specific, comprising individual state emission budgets for power generators with capacities exceeding 25 megawatts. Power generators subject to this regulation are obligated to procure program-issued allowances for each ton of GHGs they emit annually.
Environmental Commodities:
- Regional Greenhouse Gas Allowance (RGGI)
EU
EU ETS
The EU ETS is by far the largest compliance market for GHG emissions. Within Europe, emission allowances are classified as financial instruments under the MiFID II regulatory framework. STX Group trades these allowances through Vertis, a separate regulated legal entity. Vertis can provide dedicated support to regulated sectors, such as industrials, shipping, and aviation, and also operates in national ETS markets in Europe, including the national ETS systems of Switzerland, Germany, and the UK.
Environmental Commodities:
- European Union Emission Allowances (EUA)
Asia & Oceania
New Zealand
The New Zealand ETS covers a wide variety of sectors, including Transport, Buildings, Industry, Power, Forestry, Waste, Domestic Aviation These sectors represent ~49% of the country’s total emissions. Thresholds for participation are typically low and vary from sector to sector
Environmental Commodities:
- NZU (New Zealand Emissions Unit)
Interested in collaborating?
Why choose STX?
Experience and track record
- Over the past 25 years’ trading experience, STX Group and its subsidiaries have established itself as an expert in the ETS markets globally.
Advanced trading systems & risk controls
- As a leading environmental commodity trader, we boast a sophisticated trading infrastructure, robust risk management processes, and the capability to create unique trading structures for hedging price risks.
- We have direct access to major exchanges, including ICE and NODAL.
Liquidity
- We can serve as a liquidity provider by buying and selling emission allowances through spot, forward, option, and swap contracts.
Holistic perspective with deep ETS market insights
- With active involvement in over 50 environmental commodities, ranging from physical biofuels and renewable natural gas to renewable energy and carbon, STX boasts a unique perspective on the increasingly interconnected markets. This broad engagement enables us to foresee how these markets are likely to affect one other.
- We possess extensive trading experience in all major ETS markets.
International footprint with local support
- With over 500 employees from 70 different nationalities working in 12 offices, STX is a global player with local market knowledge and proximity to key ETS markets.
Contact
Interested or have any questions?