US: ICE to offer vintage-specific contract as of Monday

Intercontinental Exchange (ICE) will begin offering a California carbon allowances (CCAs) vintage-specific contract for the 2017-2020 vintage years in an effort to minimize holding limit issues.

Those contracts, which will be available for sale for the first time on Monday, would require entities who sell allowances to delivery an allowance with the corresponding vintage year. Under the current CCA contracts, sellers can delivery any allowance up to that vintage year.

Market participants had pushed for ICE to include a vintage-specific contract, because it would remove potential issues with holding limits, which restrict the number of allowances one entity may hold at any given time.

By delivery a vintage-specific allowances, a buyer of the commodity could avoid potential holding limit issues if a seller deliveries a past or current-year vintage allowances. Any allowances up to the current year-vintage is included in the state’s calculation of an entity’s holding limit.

Future vintages are not included in those calculations.

Some market participants said the new contract should open up spread trading between the vintages, because it would entitle an entity to a specific vintage versus a range of vintages.

It remains to be seen whether spread trading would develop on the back of it. dan.mcgraw@icis.com