ASX to launch renewables, carbon products

www.environmental-finance.com/
London, 16 October:

The Australian Securities Exchange (ASX) is planning to list futures and options contracts for renewable energy certificates and carbon pollution permits and also has ambitions to service New Zealand's emissions trading scheme. The exchange will be ready to offer futures and options contracts on carbon pollution permits as soon as "we see the ink dry" on the legislation establishing the Australian scheme, emerging markets general manager Anthony Collins told Environmental Finance.

In the interim, the exchange aims to "give everybody a sense of what the product specifications will look like so they can start getting their houses in order and thinking about how they can use it", he said. The futures contracts would settle on the first business day in November each year, mirroring the limited number of trades in the over-the-counter market that have occurred to date. Options contracts would expire on the first business day in October.

The ASX plans to launch its futures and options contracts for renewable energy certificates (RECs) sometime between February and May, Collins said. At a carbon price of US$14 per tonne, the carbon market will be worth about US$5.6 billion a year, while the RECs market is likely to be worth roughly US$1.4 billion a year in 2020, Collins said. The Australian government is due to issue a white paper on emissions trading legislation by the end of the year, with a scheme expected to start in 2010. The ASX is also to launch futures and options contracts for New Zealand electricity, and Collins said it is keen to service New Zealand's emissions trading scheme.

Collins says this would be a "natural extension" of the ASX's activities in New Zealand, given that it has operated the country's only futures and options market since 1993. "Most of the banks and financial firms that have an interest in servicing the scheme in New Zealand actually reside in Australia," he added. However, any ASX moves in New Zealand would await the outcome of the 8 November general election, he said.

The opposition National Party, which is favourite to win the election, has pledged to introduce a series of changes to the trading scheme. Passage of New Zealand's emissions trading legislation meant there was now regulatory certainty, but there is still "a lot of political uncertainty", he said. The New Zealand scheme began operating this year, but will cap energy sector emissions from 2010. ASX briefing details are available online.