The global market for alternative energy is estimated at $60 billion for products and services at this time and is growing rapidly, says Don Warlick, veteran energy consultant and frequent OGFJ contributor. Warlick has written a twopart series of articles on the topic beginning in this issue. He examines biofuels in depth this month. Next month, he looks at wind power and solar energy.
With the green market expanding at such a fast pace, it is no surprise that NYMEX Holdings, parent company of the New York Mercantile Exchange, has decided to get in on the action by expanding into emissions trading.
On Dec. 12, NYMEX announced it had formed a commodities trading exchange offering a comprehensive range of environmental futures, options, and swaps contracts for markets focused on solutions to climate change, renewable energy, and other environmental challenges. The new venture is called The Green Exchange, and products are expected to begin trading during the first quarter of this year and to be cleared by NYMEX.
The venture is expected to launch as a US Commodity Futures Trading Commission (CFTC)-regulated exchange during the fi rst quarter of 2009, pending regulatory approval. The Green Exchange will be directly linked to the CME Globex electronic trading platform, where NYMEX contracts are traded.
The Green Exchange is a partnership between NYMEX and Evolution Markets, an environmental brokerage, and will include major energy and environmental commodity trading houses Morgan Stanley and Tudor Investment Corp. Other venture partners include Credit Suisse, JPMorgan, Merrill Lynch, ICAP, and Constellation Energy.
Although NYMEX brings a strong coalition into its new venture, it is not the fi rst environmental exchange. The Chicago Climate Exchange (CCX), launched in 2003, claims it is “the world’s fi rst exchange for trading emissions of all six major greenhouse gases with offset projects worldwide.”
CCX emitting members make a voluntary but legally binding commitment to meet annual greenhouse gas emission reduction targets. Those who reduce below the targets have surplus allowances to sell or bank. Those who emit above the targets comply by purchasing CCX carbon financial instrument contracts.
Other main carbon emission >exchanges worldwide include the European Climate Exchange, Nord Pool, and Powernext Carbon. The Montreal Exchange and CCX also plan to launch MCeX, a carbon futures contract based on Canadian emission credits, in the near future.
As Don Warlick says in his article on alternative energy, “There certainly is no lack of investment capital to support this fast-growing sector.” The same can be said for emissions trading. OGFJ
Don Stowers
Editor-OGFJ
