Dutch exchange plans world's first biomass product

LONDON Mon May 16, 2011 12:38pm EDT

LONDON (Reuters) - The APX-Endex energy exchange and the Port of Rotterdam will launch an exchange-traded wood fuel product by the end of the year, the first of its kind, the exchange told Reuters on Monday.

The global biomass market is growing as a result of emerging economy demand and European Union targets to replace fossil fuels with renewable sources of energy, but there are still few international pricing benchmarks.

APX-Endex and the Port of Rotterdam said last year they would investigate the possibility of an exchange-traded product.

They would launch the product -- based on industrial wood pellets -- by the end of 2011, the exchange said on Monday, as they and various partners developed standardized contracts and specifications.

"It is difficult to say who will sign up as a trading member from the beginning, we aim to have 8-10 members to start with," said an energy exchange spokeswoman.

The quoted price would be based on delivery in Rotterdam, which APX-Endex said accounted for about 15 percent of the 8-10 million ton global annual wood pellet production.

The two companies were still developing the exact product specifications which would enable a standardized contract.

One reason for a more general delay in the development of biomass as a commodity is because of uncertainty in the key European Union market, say analysts and investors.

The European Commission is deciding whether it needs to toughen its "sustainability criteria," which are meant to help its member states avoid supporting bio-energy products which compete with food production or damage natural forests including rainforests.

"Sustainability criteria are a specific feature for this market, but the Industrial Wood Pellet Buyers initiative (IWPB) is working on that part to come to standardization. We will probably adhere to the outcome of this initiative," said the APX-Endex spokeswoman.

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