Xpansiv, the market-infrastructure platform for carbon and environmental commodities in which Blackstone is a major investor, has been granted an Australian financial services licence that will allow it to establish a “market-making platform” for the trading of Australian Carbon Credit Units.
The firm will launch the platform for trading ACCUs through its energy and environmental commodity spot exchange, CBL, in the first quarter of 2023. Xpansiv says that this will make it the first exchange to offer ACCU trading.
More than 90 percent of spot exchange-traded carbon credits globally are currently transacted on CBL, according to Xpansiv.
Speaking to Agri Investor, Xpansiv chief commercial officer and CBL co-founder Ben Stuart said that receiving its ASFL was a “big move forward” for the company and the sector.
The firm had initially participated in a process being run by Australia’s Clean Energy Regulator to create and procure an Australian Carbon Exchange, but Stuart said it decided to go its own way due to a desire to focus on wholesale investors, rather than the retail investor audience targeted by the CER process.
“I definitely think this will help the market mature,” Stuart said. “For a multitude of reasons, you’re seeing a lot of issues with liquidity in the broader energy space at the moment because of credit and counterparty risk – and us providing a way to alleviate some of those problems can only be a benefit for the market.”
Stuart said that in order for the carbon market to continue to grow, large entities needed better ways to interact with each other and trade credits, and exchanges such as CBL could play a role in facilitating that.
He said the potential buyer pool for ACCUs is very varied and broad: “Any corporates with net-zero commitments, there are a lot of financial institutions looking to provide liquidity to their customers, a lot of commodity trading houses, financial markets players looking to get exposure to carbon markets.
“That’s a nuance of this market – outside of FX, it’s almost the only market in the world that covers traditional commodities players, traditional financial markets and everything in between. That leads to a very interesting total addressable market.
“The existing non-regulated forces are providing enough demand in the market, but some increased regulation can only increase that demand. If we can get a clear liquid price signal out there, that’ll increase the investment side as well, which will allow the market to develop and more projects to be carried out, and it becomes a bit of a snowball effect.”
Funds managed by Blackstone Energy Partners committed $400 million to lead a strategic investment in Xpansiv in July 2022.
At the time, Blackstone senior managing director Bilal Khan said in a statement: “We believe environmental commodities are a critical new asset class that must scale exponentially to meet climate change mitigation targets pledged by governments, companies and entire industries. Xpansiv is a leader in this space, and we are delighted to provide the capital and resources to help them further expand their offerings and accelerate their growth.”