The European Energy Exchange (EEX) is launching an index to show the cost of carbon to the dry-cargo shipping industry.
The zero-carbon freight index to be published by the German clearing house from 12 July will show a daily “synthetic” freight forward agreement (FFA) rate inclusive of 100% carbon reduction.
The index will initially publish prices for capesize and panamax FFAs.
Richard Heath, EEX's head of global commodities, told a webinar on Thursday that price information would be taken from the freight derivatives and emissions futures markets.
Prices would be combined to create an FFA rate that includes 100% carbon reduction.
Growing number of FFA brokers are poised to provide trading solutions in carbon.
Shipbroker SSY sets up carbon desk
Leading shipbroker Simpson Spence Young (SSY) will launch a carbon trading desk in July, said Duncan Dunn, senior director with SSY Futures.
The desk would operate for both compliance and voluntary carbon trading markets.
Price transparency and price-risk management are expected to be necessary as carbon trading markets develop.
“It is likely that in future we will have the indication of the cost of carbon in the freight market, but there is going to be a delay,” said Heath.
However, he added that prices on the zero-carbon index would be immediately tradeable.
“This is not just a theoretical exercise,” he said.
“This is mimicking behaviour that we do see some organisations [doing] in the dry-bulk freight FFA market.”
Leipzig-based EEX has grown rapidly since entering the freight market in 2016 and accounts for more than 40% of the open interest in the dry freight derivatives market.
It is launching the new index amid uncertainty about how the maritime sector will be affected by the European Union Emissions Trading System.
