The Australian Securities Exchange (ASX), Australia’s primary stock exchange which was formed when the Australian Stock Exchange and Sydney Futures Exchange merged in late 2006, has today announced a plan to start trading carbon futures in the third quarter of 2009. The futures contracts for renewable energy credits, natural gas, and coal would complement the ASX’s existing electricity futures market.It is expected that futures contracts for renewables will be offered by the end of the year, while contracts for gas in Victoria, electricity in New Zealand, and power station coal exports from Newcastle in New South Wales will commence in March or April 2009.

The general manager of emerging markets at ASX, Anthony Collins, said today that trading in Newcastle coal futures contracts could rival the West Texas Intermediate on the New York Mercantile Exchange within a year, buoyed by interest from Japanese power utilities, trading houses, and investment banks.

Carbon futures trading would allow companies to gain important trading experience prior to the introduction of a national emissions trading scheme, slated to start in 2010. In May, a symbolic over the counter trade of Australian carbon pollution permits took place between two of Australia’s oldest companies, AGL Energy Ltd and Westpac Banking Corp. However, without regulatory certainty about the design of an emissions trading scheme, and specifically the emissions reduction trajectories, it seems unlikely that the carbon funds and investment banks will be willing to dip their toes into the Australian carbon futures market, which will remain dominated by renewable energy generators and electricity retailers that have liabilities under the Government’s mandatory renewable energy target.

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