NYMEX WILL TRADE EMISSIONS

The point: Emissions trading is rapidly becoming a fact of business life. Buy some credits.

Nymex plans to offer carbon trading; Entry might herald competition between energy exchanges
May 10, 2007 (AP via MSNBC)

WHO
The New York Mercantile Exchange (NYMEX)


WHAT
Carbon dioxide emissions trading will be possible via NYMEX, the world's largest energy futures exchange.
WHEN
Launch date of the market is not established. A US mandatory market is not expected until after the 2008 presidential race is settled.

WHERE
The European Union has a mandatory cap-and-trade market for its member nations. NYMEX is Wall Street-based.

WHY
- Carbon trading is described as a “multibillion dollar trading market” and the NYMEX move suggests a new level of competition.
- Trading in carbon dioxide emissions is widely seen as a method of using free market dynamics to control and reduce greenhouse gas emissions. Allowances for emissions are established by legislatively validated institutions for whole industries and individual businesses in the industry. If a business wants to emit beyond its allowance, it buys allowances from a business emitting below its limit. The purchase is made through a market. Currently, the Chicago Climate Exchange (CCX) is the only US marketplace for such allowances, which have heretofore been voluntary. The NYMEX move not only creates competition for CCX but anticipates a national compulsory cap-and-trade market.
- While emissions trading is a purely practical undertaking for businesses with too many or too few emission credits, the commodity exchange is a traditional form of investment hedging and is expected to be so used by smart energy investors here.

QUOTES
Bob Levin, senior vice president, Nymex: “The interplay between the existing energy marketplace and the environmental one is very strong…It's a very natural place for us to be and much of the industry sees it that way."
Levin: "Alternative energy offered to consumers and businesses is going to be very popular…"