NYMEX begins trade of emissions contracts

LOS ANGELES (Reuters) - The New York Mercantile Exchange and Evolution Markets on Monday launched The Green Exchange with futures trading based on emissions, including one linked to the ongoing European carbon market.

The Green Exchange is a partnership between global energy exchange leader NYMEX and Evolution Markets, a leading environmental and energy brokerage based in the New York area.

Two of the new contracts are based on European emissions and two are U.S. emissions trading schemes.

These are the first wave of Green Exchange contracts related to environmental concerns, which will within a few months include renewable energy credits and voluntary carbon credits.

Trading of the new contracts will not be affected by the purchase of the NYMEX by the CME Group Inc, said Evan Ard, spokesman for Evolution Markets. A definite agreement on that sale was announced on Monday.

The United States lags behind the European Union which in 2005 established a mandatory climate exchange that has traded billions of dollars of credits.

The new venture will for some of its contracts compete with the biggest exchanges for trading carbon emissions credits, the European Climate Exchange and the first one, the Chicago Climate Exchange, opened in 2003. Both of those are run by London-based Climate Exchange Plc.

Ard of the Green Exchange said he expects volume of trade to grow for the new contracts.

“The markets in Europe are already active,” said Ard. “We anticipate the Green Exchange will bring in some new volumes from partners that already trade on the NYMEX (energy markets).”

The contracts will be traded on the same schedule as the existing NYMEX futures products that include energy-related crude oil and natural gas along with metals such as gold and silver. The new products will therefore be traded around the world on an almost 24-hour basis.

The first four contracts on the Green Exchange are the Europe-based EUA, and certified emission reduction (CER) futures, and U.S.-based nitrogen oxide (NOX) emission allowances, and sulfur dioxide (SO2) emission allowances.

There are nine separate contracts for NOX trading. They are five for seasonal allowances, for 2008, 2009, 2010, 2011, and 2012, and four for annual allowances for 2009, 2010, 2011 and 2012.

The EUA settled on Monday at $22.28 for December delivery. The CER for December delivery settled at $15.55. The SO2 for March delivery settled at $425. Seasonal 2009 NOX settled at $750 and yearly NOX for 2008 settled at $2,825.

The first trade was done between two of the Green Exchange’s founding companies -- Geneva-based Vitol SA and New York-based RNK Capital LLC.

The first trades on one of the U.S.-based emissions products was on the SO2 allowance futures, between Koch Supply & Trading LP based in Kansas and Alpha Energy Partners LLC, a private diversified energy firm based in Texas.

“This (Koch-Alpha) transaction marks the beginning of what we expect to become a vibrant market for U.S. emissions trading,” said Rob Jones of Merrill Lynch, in a press release.

All trades are submitted for clearing on the NYMEX ClearPort over-the-counter clearing platform and are also conducted electronically using the CME Globex platform.

The Green Exchange was introduced four months ago by NYMEX. Its founding members in addition to Evolution Markets are Credit Suisse, JPMorgan, Merrill Lynch, Morgan Stanley Tudor Investment and Constellation Energy.

Last week, Vitol SA and RNK Capital were added to the list of founding members.

Reporting by Bernie Woodall; Editing by Marguerita Choy