Published On: Thu, Oct 8th, 2009

ASX to Introduce Renewable Energy Futures

Oct. 7 (Bloomberg) — The Australian Securities Exchange said trading in renewable-energy futures and options will start next month after lawmakers passed a bill requiring the nation to derive 20 percent of its power from clean fuels.

The exchange, owned by ASX Ltd., said it will list futures and options contracts for renewable energy certificates on Nov. 24. The ASX said trading of certified emission reduction contracts would be introduced in the first quarter of next year.

“This is an extension of the products we’re already providing,” Anthony Collins, the exchange’s general manager of energy and environmental markets, said by phone today. “It will help firms manage risk” posed by fluctuating prices and to “invest with certainty.”

Australia, the world’s biggest coal exporter, must source 20 percent of its power from renewable energy by 2020 under the new law. Broader emission-reduction legislation proposed in Australia may be resubmitted in November after being defeated by upper-house lawmakers. Prime Minister Kevin Rudd wants carbon trading to start in 2011.

The ASX also said it plans to list futures and options on carbon emission permits if the government’s pollution reduction plan is passed. A futures contract is an agreement to buy or sell a specific amount of a commodity or security at a specific price and time. Options grant the right, but not the obligation, to buy or sell at a set price.

The introduction of futures and options contracts on renewable energy certificates supports the Australian government’s new target, the Australian Securities Exchange said. Each REC is equal to one megawatt-hour of renewable energy generation.

“All of these markets are small to start with,” Collins said. “They will take several years to mature.”

Source: Bloomberg

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