From Business Insider, September 29:
Founder of new commodities exchange explains how it can fuel the green energy transition
- Abaxx is a new commodities exchange that aims to stabilize prices and aid the energy transition.
- "Trade and network keeps the world at peace," Abaxx's CEO told BI.
- Investment in the energy transition hit $1.8 billion in 2023, led by China and the US.
The race to clean-up the global economy is on.
Investment in the energy transition — a broad shift from fossil-based energy production systems to renewable resources like wind and solar power — hit $1.8 billion in 2023, with countries like China and the United States leading the charge, according to BloombergNEF, an energy research company. The International Energy Agency says total investment in clean energy could reach $2 trillion by the end of the year.
But the shift to a cleaner, lower-carbon world doesn't depend solely on the work of government officials, legislators, or even major businesses. It also hinges on players working behind the scenes to secure the prices of key commodities like liquefied natural gas, essential for electricity generation and heating, and carbon offsets, which help companies counteract the impact of their carbon emissions.
A new Singapore-based commodities exchange called Abaxx, which launched in June, is working to do that by providing companies, governments, and project developers with a transparent marketplace for their trades. Commodities markets help stabilize prices by helping suppliers and consumers figure out fair prices, hedge against volatile price changes, and execute efficient and transparent transactions.
Exchanges like Abaxx play a role in this because they help lock in prices and mitigate drastic fluctuations in the future. Abaxx deals in futures contracts, legally binding agreements to buy or sell commodities at a specified future date. Three regionally deliverable liquified natural gas contracts and two carbon offset contracts are already trading on the exchange. It's working on launching futures contracts for gold and battery metals, like lithium, a component in batteries that power EVs like Tesla.
Josh Crumb, the CEO and founder of Abaxx, says unclear pricing can lead to higher and more volatile prices for consumers while also forcing commodity producers to navigate turbulent investment cycles.
"If we look at the battery supply chain, nickel sulfate, lithium, cobalt, these things have gone through huge swings of boom and bust over the last couple of years," Crumb told Business Insider. "The main reason why is we don't have a lot of market transparency so that people can forward plan, price, hedge, all of that."
Crumb first realized that the commodity industry needed more innovation when he was working as a strategist at Goldman Sachs in the years following the 2008 financial crisis. That coincided with the end of the commodities boom of the 2000s, during which the prices of many commodities, from food to oil to chemicals, had drastically surged.
Now, with trading in full swing, Crumb hopes Abaxx will play a role in stabilizing what he sees as the next commodity investment cycle — marked not just by a need for new commodities to facilitate the energy transition but also a surge in electrification....
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