The annex should let emissions traders enter into agreements on physical emissions, commodities and financial derivatives using one document, and also allow netting if a counterparty defaults. It standardises terms used in emissions purchases and swaps that are governed by Isda’s master agreement schedule.
The annex covers carbon credits listed on the Chicago Climate Exchange, emissions of nitrogen oxide, sulphur dioxide and any emissions allowance or credit created under US state-run trading schemes. Isda said the new annex would be broadened to include more products as they gain liquidity in the market.
Its publication follows similar standardisation work carried out by the association for the European emissions-trading market.