More and more investors and stakeholders are excited to get in the game on one of the hottest markets today - the carbon credit market, especially the 'big three' - GEO, N-GEO, and C-GEO. These are the most desirable new carbon markets for investors right now. Still, most investors are unaware of GEO, N-GEO, and C-GEO market possibilities.
But be that as it may, it's now possible to join the fight to simultaneously slow down climate change and reach long-term returns. And although the carbon market is relatively new, it sparked lots of interest.
For example, McKinsey published that carbon credits might help companies, and the world, drastically reduce CO2 emissions and support saving our climate. McKinsey expects carbon market credits to reach $50 million worth by 2050. However, most investors are only now finding out about the three voluntary carbon markets worth looking into.
So let's go over the three-carbon market products that most investors still haven't started exploring. First, we'll explain carbon credit allowances before explaining the difference between GEO, N-GEO, and C-GEO.
Carbon Offsets and Allowance Credits
The holders of European Union Allowances (EUAs) and California Carbon Allowances (CCAs) may emit a particular amount of CO2 pollution yearly.
Carbon credits are an excellent opportunity in the market, so if you're thinking about investing, here is how they work. Carbon offset credits are units of value that reduce a company's carbon emissions. This "footprint' creates offset credits and the network for certifying, registering, and trading them.
Investors can trade these allowances, leading to a growing secondary futures market. For example, one of the most potent carbon funds, KRBN, holds these carbon allowance futures.
To explain, the GEO, N-GEO, and C-GEO work similarly to the above mentioned, only with one significant difference. Firstly, as the name GEO suggests, it's all about the Global Emissions Offset. Secondly, these carbon market products are based on voluntary carbon allowances instead of compliance market offsets.
The Three Types of Offset Contracts - GEO, N-GEO, and C-GEO
GEO stands for Global Emissions Offset, N-GEO is Nature-Based Global Emissions Offset, and C-GEO stands for Core Global Emissions Offset contracts. The C-GEO contracts are based a wide range of underlying credits from various sectors, such as energy, renewables, and other technology-based offsets credits, except forestry credits. The N-GEO contract comprises underlying Verified Carbon Standard/Climate, Community and Biodiversity Standard-certified credits.
The Chicago Mercantile Exchange (CME Group) launched GEO, N-GEO, and C-GEO to match the drastically growing demand for carbon offsets in the lucrative carbon market sector. However, there are some differences between the three regarding their offset futures.
1. GEO Futures Contracts
GEO focuses on the aviation industry carbon market, with carbon offsets from the Climate Action Reserve, Verra, and the American Carbon Registry. In addition, the GEO carbon market is offering credits for projects in the tech sphere following the International Civil Aviation Organization's standard CORSIA.
The other name for futures contracts on the GEO carbon market is 'Aviation Industry Carbon Offsets' since they base on the credits following the industry's standard for CO2 emissions offsets.
That said, you should know that the GEO carbon market isn't limited only to aviation, although this was the original intention behind these products. Instead, CORSIA represents a guidance framework crafted by the United Nations, making these carbon offsets an excellent investing opportunity. After all, the mere fact that these offsets meet the rigid CORSIA rules makes them high-quality and lucrative.
2. N-GEO Futures Contracts
N-GEO was born shortly after the GEO launch. Unline GEO, which does not have any Other Land Use projects, the nature-based carbon offset consists of agriculture, forestry, and AFOLU efforts. These carbon offsets represent invaluable help to biodiversity. However, the proper carbon offset verification in these projects can be challenging.
For this reason, N-GEO also contains a massive part of the carbon offset market uncovered by GEO. This possibility makes it easier for AFOLU sector companies to reduce their CO2 emissions.
3. C-GEO futures contracts
GEO launch was in early 2022, and it's technology-based. C-GEO is the newest carbon offset market, with the letter C standing for Core - the Taskforce on Scaling Voluntary Carbon Markets' Core Carbon Principles (CCPs). These principles are the basis for global carbon credit market creation. When it comes to GEO contracts, they consist of CCP-aligned technology projects in the Verra registry.
At the moment, CCPs are still a new thing. However, experts expect their expansion in 2022. In fact, CCPs might become the global offsets projects standard in the future.
The latter sounds excellent for companies that want to invest in top-notch tech-based offsets and make serious money using Core Carbon Principles.