Carbon Footprint Methodology

This document details the approach used to associate a carbon emission footprint with the AiLA commodity products, calculated as metric tons (MT) of CO2 emissions for a given amount of capital invested.

Definitions

Business Day for an asset refers to a day where all constituent Assets are trading and has a settlement Close Price.
Weight refers to the percentage of capital allocated to a particular Commodity Contract on a given day.

1) Number of Contracts per Commodity

  • Given the standardized futures contract size, the quantity of each Commodity (C) is calculated in terms of number of contracts for a given weight at close of Business Day (𝑡).
  • On each Business Day, the Commodity Weight (w c ) is calculated by summing the Weights (w) across different contracts (i)
  • The Commodity Weight ignore the sign of the weight, where typically a short position has a negative Weight
  • The corresponding Number of Contracts (N C) is calculated from the Allocated Capital (A), Commodity Weight (w c ) and Commodity Contract Price (p C)
  • The Commodity Contract Price (p C ) is based on the spot or front contract price at the close of day (t), together with the contract size and FX rate

2) Emission Per Contract

  • For each Commodity, CO2 equivalent conversion factors are used from public sources such the US Environmental Protection Agency (EPA) and European Environmental Agency (EEA). These conversion factors are normalized to derive an Emission Conversion Factor (E C ) in MT CO2 per base unit for each Commodity (C). (E.g. for WTI Crude, the units will be MT/barrel).
  • The results in Appendix 1 use recent fixed conversion factors from the relevant data sources. These values will be updated as these conversion factors change over time.
  • To determine the Emission Per Contract,

    Where L C is the Contract Size by Commodity (E.g. A contract of WTI Crude Futures contains 1,000 barrels, thus L WTI =1,000)

3) Carbon Footprint Exposure for AiLA Product

  • In order to determine the Carbon Footprint Exposure (CF(t))for an AiLA product for a given Business Day (t),

Appendix 1 – Carbon Footprint by Commodity

Commodity Emission Unit Data Source
WTI CME 430.0000 MT/Contract https://www.epa.gov/energy/greenhouse-gases-equivalencies-calculator-calculations-and-references
Brent ICE 430.0000 MT/Contract https://www.epa.gov/energy/greenhouse-gases-equivalencies-calculator-calculations-and-references
RBOB CME 373.2540 MT/Contract https://www.epa.gov/energy/greenhouse-gases-equivalencies-calculator-calculations-and-references
Heating Oil CME 427.5600 MT/Contract https://www.epa.gov/energy/greenhouse-gases-equivalencies-calculator-calculations-and-references
Gas Oil ICE 318.5300 MT/Contract https://www.epa.gov/energy/greenhouse-gases-equivalencies-calculator-calculations-and-references
Natural Gas CME 529.1000 MT/Contract https://www.epa.gov/energy/greenhouse-gases-equivalencies-calculator-calculations-and-references
NBP ICE 0.0053 MT/MMBTU https://www.epa.gov/energy/greenhouse-gases-equivalencies-calculator-calculations-and-references
TTF ICE 0.1805 MT/MWh https://www.epa.gov/energy/greenhouse-gases-equivalencies-calculator-calculations-and-references
API2 Coal 29,040.0000 MT/Contract https://360energy.net/how-does-using-energy-create-carbon-emissions/
German Power ICE 0.2810 MT/MWh https://www.eea.europa.eu/data-and-maps/indicators/overview-of-the-electricity-production-3/assessment
Nordic Power NASDAQ 0.2810 MT/MWh https://www.eea.europa.eu/data-and-maps/indicators/overview-of-the-electricity-production-3/assessment
French Power ICE 0.2810 MT/MWh https://www.eea.europa.eu/data-and-maps/indicators/overview-of-the-electricity-production-3/assessment
UK Power ICE 0.2810 MT/MWh https://www.eea.europa.eu/data-and-maps/indicators/overview-of-the-electricity-production-3/assessment
Australia Power ASX 0.4330 MT/MWh https://www.epa.gov/energy/greenhouse-gases-equivalencies-calculator-calculations-and-references
Singapore Power SGX 0.4330 MT/MWh https://www.epa.gov/energy/greenhouse-gases-equivalencies-calculator-calculations-and-references
Gold CME 100.0000 MT/Contract https://www.spglobal.com/marketintelligence/en/news-insights/blog/greenhouse-gas-and-gold-mines-nearly-1-ton-of-co2-emitted-per-ounce-of-gold-produced-in-2019
Platinum CME 62.5000 MT/Contract https://www.researchgate.net/publication/223232620_The_environmental_costs_of_platinum-PGM_mining_and_sustainability_Is_the_glass_half-full_or_half-empty
Palladium CME 125.0000 MT/Contract https://www.researchgate.net/publication/223232620_The_environmental_costs_of_platinum-PGM_mining_and_sustainability_Is_the_glass_half-full_or_half-empty
Aluminium LME 275.0000 MT/Contract https://css.umich.edu/sites/default/files/publication/CSS19-36.pdf
Lead LME 41.0000 MT/Contract https://www.winnipeg.ca/finance/findata/matmgt/documents/2012/682-2012/682-2012_Appendix_H-WSTP_South_End_Plant_Process_Selection_Report/Appendix%207.pdf
Nickel LME 69.1800 MT/Contract https://www.winnipeg.ca/finance/findata/matmgt/documents/2012/682-2012/682-2012_Appendix_H-WSTP_South_End_Plant_Process_Selection_Report/Appendix%207.pdf
Zinc LME 96.5000 MT/Contract https://www.winnipeg.ca/finance/findata/matmgt/documents/2012/682-2012/682-2012_Appendix_H-WSTP_South_End_Plant_Process_Selection_Report/Appendix%207.pdf
Copper CME 34.0000 MT/Contract https://www.winnipeg.ca/finance/findata/matmgt/documents/2012/682-2012/682-2012_Appendix_H-WSTP_South_End_Plant_Process_Selection_Report/Appendix%207.pdf
Copper LME 75.0000 MT/Contract https://www.winnipeg.ca/finance/findata/matmgt/documents/2012/682-2012/682-2012_Appendix_H-WSTP_South_End_Plant_Process_Selection_Report/Appendix%207.pdf
Steel Rebar SHFE 15.0000 MT/Contract https://www.researchgate.net/publication/305827970_Comparison_of_carbon_dioxide_emissions_intensity_of_steel_production_in_China_Germany_Mexico_and_the_United_States
Corn CME 20.8290 MT/Contract https://www.scientificamerican.com/article/how-growing-corn-could-produce-less-pollution/#:~:text=These%20farmers%2C%20according%20to%20Sheehan's,studies%20from%20Argonne%20National%20Laboratory.
Bean CME 17.0060 MT/Contract https://ussoy.org/soy-sustainability-reducing-greenhouse-gas-emissions/
Meal CME 54.6000 MT/Contract https://edepot.wur.nl/324258
Bean Oil CME 115.6200 MT/Contract https://www.sciencedaily.com/releases/2022/03/220321115838.htm#:~:text=Crop%20specific%20median%20emissions%20ranged,oil%20getting%20more%20negative%20attention.
Palm Oil MDX 85.2500 MT/Contract https://www.sciencedirect.com/science/article/abs/pii/S0959652620340907#:~:text=The%20consequential%20results%20show%20that,%2Fkg%20for%20non%2Dcertified.
Live Cattle CME 2,216.000 MT/Contract https://beef.unl.edu/beefwatch/2020/how-many-pounds-meat-can-we-expect-beef-animal ; https://www.fao.org/news/story/en/item/197623/icode/#:~:text=Emission%20intensities%20(i.e.%20emissions%20per,%2Deq.kg%20respectively).
Feeder Cattle CME 396.9000 MT/Contract https://www.ncbi.nlm.nih.gov/pmc/articles/PMC4494322/#:~:text=yearling%2Dfed%20production%20systems%20with,e%20per%20kg%20carcass%20weight).
Lean Hogs CME 90.7200 MT/Contract https://porkcdn.s3.amazonaws.com/sites/all/files/documents/NPB%20Scan%20Final%20-%20May%202011.pdf
NY Cocoa ICE 60.0000 MT/Contract https://www.scielo.br/j/eagri/a/FzJM7R98j6Z9gT3Swxdwysp/?lang=en
London Cocoa ICE 60.0000 MT/Contract https://www.scielo.br/j/eagri/a/FzJM7R98j6Z9gT3Swxdwysp/?lang=en
Arabica Coffee ICE 25.8563 MT/Contract https://www.idhsustainabletrade.com/uploaded/2019/03/The-carbon-footprint-of-Vietnam-robusta-coffee_2019.pdf
Robusta Coffee ICE 15.2000 MT/Contract https://www.idhsustainabletrade.com/uploaded/2019/03/The-carbon-footprint-of-Vietnam-robusta-coffee_2019.pdf
Sugar ICE 12.1968 MT/Contract https://cbmjournal.biomedcentral.com/articles/10.1186/1750-0680-5-3#:~:text=According%20to%20this%20study%20each,each%20ton%20of%20sugar%20produced.
White Sugar ICE 12.0000 MT/Contract https://cbmjournal.biomedcentral.com/articles/10.1186/1750-0680-5-3#:~:text=According%20to%20this%20study%20each,each%20ton%20of%20sugar%20produced.