Later this year we will be able to trade in renewable energy futures and options contracts on the ASX, so if you are green and numerate (as people at Macquarie Bank undoubtedly are) there’s another trading opportunity to contend with.
The ASX said there were currently more than 80 clean technology companies with a combined market capitalisation in excess of $10.5 billion listed, so it seems them and larger companies like BHP Billiton, Rio and big banks, such as Macquarie, are early players in this market.
Besides shares and financial products, such as derivatives and options on the share price index and on bonds, the ASX also trades electricity and natural gas futures and options markets in Australia and New Zealand.
The ASX said yesterday the new contracts will "support the federal government’s renewable energy target (RET) scheme".
The contracts will be based on Renewable Energy Certificates (REC) and list on Tuesday November 24.
Each REC represents one megawatt hour (MWh) of electricity generated from renewable energy and can be earned by installing solar panels, wind turbines and micro-hydro plants.
Trade in RECs aims to help ensure Australia meets its target for 20% of electric power to come from green sources by 2020.
Reuters says that In over-the-counter trade, REC prices have dropped to $A28.50 per certificate, the lowest level in more than two years, because the market has been flooded with RECs generated by installers of solar hot water panels and heat pumps.
The ASX said the new contracts will support the RET scheme, which is designed to ensure that 20% of Australia’s electricity comes from renewable sources by 2020.
The ASX also plans to list certified emission reduction (CER) futures and options contracts in the first quarter 2010.
CERs are credits generated by projects in developing countries that are registered as having led to a reduction in greenhouse gases under the Kyoto climate change treaty, which is due to be renegotiated at a summit in Copenhagen in December.
"ASX’s CER futures and options contracts have been designed to service the specific requirements of prospective compliance entities in Australia and New Zealand, as well as investors and developers involved in Clean Development Mechanism projects.
"Subject to the passage of the proposed Carbon Pollution Reduction Scheme legislation in Australia, ASX also intends (after regulatory clearance) to list futures and options on Australian Emission Units (AEU).
"The introduction of REC, CER and AEU futures and options at ASX will enable market participants to manage their market risks and make informed investment decisions about climate change and related Government policies.
"The listing of these products will help firms in Australia and New Zealand to facilitate carbon trading, finance and investment, as well as to provide related risk and legal advisory services,’ the ASX said in yesterday’s statement.
"Given the penetration and liquidity of ASX’s existing electricity futures markets in Australia and New Zealand, organisations accounting for over 50 per cent of greenhouse gas emissions in both countries are already users of ASX market infrastructure," the ASX said.
The new range of trading products complements existing ASX energy and environmental products.
The ASX said it will enable market users to leverage existing financial market infrastructure developed for energy products servicing Australia and New Zealand.
"Users will also gain operational and capital efficiencies by clearing those products at a single clearing house, SFE Clearing Corporation, ASX’s futures central counterparty clearing subsidiary.
"Flexible operating rules will also enable the clearing of over-the-counter (OTC) derivative transactions via block trading facilities.
"This new range of products will complement existing ASX energy and environmental markets and products which inform investment decisions and assist in the transition to a less carbon intensive economy.
"To assist with preparations for the listing of its new futures contracts, ASX will convene a lunch-time briefing for its Participants and interested parties in its Sydney auditorium on Monday, 19 October 2009. ASX will also convene briefings in Wellington, Singapore, Hong Kong, Tokyo, London, New York and Chicago."
