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Participants in the carbon market have expressed a desire to both minimize their risks and maximize their engagement with customers and stakeholders in this market.
Increasingly, sellers are bundling units together in a package to "insure" the credits sold. These can be issued credits bundled with other issued credits, or issued credits bundled with credits yet to be issued or verified.
Bundling two units together can help remove concerns about permanence, verification and also tell a combination of stories to your market about the kinds of credits that have been purchased.
Markit Environmental Registry has created a new way to help buyers achieve these goals by enabling baskets to be created with units in the Registry.
Environmental Baskets enable the bundling of two or more units on the Registry in whatever combination a customer wishes.
For example, verified emission reduction credits (VERs) from a longer term project or units pending issuance in the Registry (i.e. Pending Issuance Units) can be matched with verified and issued technology-based tonnes, effectively insuring the pending units.
Environmental Baskets assists the market in many ways:
- Alleviate concerns about permanence and the ultimate delivery of carbon reductions from longer term projects. By linking, for example, a PIU with an existing issued VER, the Environmental Basket created by the seller offers a buyer both an immediate reduction (derived from the VER) together with the potential for a further reduction to be achieved from the credit yet to be issued, represented by the PIU.
- Enables project developers to frontload a project's financing to generate revenue at the earliest possible point in its lifecycle. This will potentially give smaller projects a mechanism to demonstrate their viability to investors.
To create a Basket:
- Both or all of the relevant carbon projects must first be listed in the Markit Environmental Registry.
- All units making up the Basket must be held in the appropriate account on the Markit Environmental registry. For example, issued credits must be held in the seller's primary Registry holding account and Pending Issuance Units (PIUs), must be held in the seller's primary PIU Registry holding account.
- The Account Holder initiating the Basket must provide a completed online Basket Authorisation Form, which details the two or more types of units to comprise the Basket, the volume of units in the Basket and obtains authority from the Account Holders who are the registered owners of the units in the Basket to create the Basket with their units.
- The equal number of units loaded into the Basket section of the Registry are then linked with a 1:1 ratio to create a new, bundled Environmental Basket.
- Each individual component of the Environmental Basket is tagged to clearly identify it is part of a Basket. The tags are designed to ensure complete transparency and guarantee the auditable nature of the Basket.
- Once the Baskets are created they can be listed on the Basket RFI Platform for sale to purchasers.
- Note: Until sold, the units in a Basket remain separately held in their respective accounts on Registry. At any time before sale of a Basket, the units in a basket can still be sold separately (cancelling a Basket).
- Once a Basket is sold in its entirety, the Basket is transferred to the purchaser's Holding Account on the Basket section of the Registry, and the underlying unit transfers are reflected in on the Registry.
- Baskets can be retired at any time; the underlying units in each Basket are simply retired. All details will be transparent to demonstrate this has occurred and that there is no opportunity for any of them to be listed again or sold separately.
All of the above processes are represented in the Registry as outlined in the following diagram:
Baskets can be listed on the RFI Platform.
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