Four EU Markets Will Compete In Emissions Trading - Reuters

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"Bourses from Germany, Britain, Norway and Austria will compete with over-the-counter (OTC) brokers for business in the European Union's CO2 emissions trading scheme which starts on January 1. Energy companies say the bourses may have the edge over brokers as exchanges are a less risky way of trading with the thousands of firms which will be involved in the scheme, the world's first international market for trading emissions.

"We see trade going more towards exchanges than OTC brokers," said Paul Lee, an emissions trader at UK-based generator International Power. "If you look at the counterparties, many are very small installations dotted around Europe. Doing a trade through an exchange is easier as there is a standard contract and it's a cleared market which eliminates credit issues."

The four exchanges are Germany's European Energy Exchange (EEX), the Oslo-based Nordic power bourse Nord Pool, Austria's EXAA and Britain's International Petroleum Exchange which has set up an emissions trading venture -- the European Climate Exchange -- with Chicago's Climate Exchange. The EU scheme involves 12,000 sites across the bloc including power stations, steel-makers and other energy-intensive industries.

Companies are given CO2 limits and if they exceed these, they have to buy allowances -- essentially the right to pollute -- from firms which undershoot their target. Barclays Capital has estimated the emissions market could be worth up to 40 billion euros ($53.30 billion) a year, if its growth matches that of the region's power markets."

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http://www.planetark.com/dailynewsstory.cfm/newsid/28597/story.htm