Exchange-traded products for the EU Emissions Market Milano Energia Milan, 5 October 2005 Peter...
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Transcript of Exchange-traded products for the EU Emissions Market Milano Energia Milan, 5 October 2005 Peter...
Exchange-traded products for the EU Emissions Market
Milano Energia
Milan, 5 October 2005
Peter Koster, Chief Executive Officer, European Climate Exchange
2
Contents
• Background on the European Emissions market;
• Market characteristics: Volumes, Prices and Players
• Introduction to the European Climate Exchange;
• How do emissions relate to other energy markets?
• Looking ahead: the carbon market & the future
3
European Climate Exchange
» The European Climate Exchange (ECX) is a wholly-owned subsidiary of the Chicago Climate Exchange (CCX) which, in collaboration with the International Petroleum Exchange (IPE), offers a series of emissions products;
» ECX Carbon Financial Instruments futures Contracts are listed and traded on the IPE and offers a pan-European electronic trading platform where industry and financial institutions can trade CO2 under the EU Emissions Trading Scheme;
» ECX CFI futures Contracts are financially guaranteed by LCH.Clearnet;
» At current prices, the EU carbon market has an annual baseline value of €50 bn in 2005;
» ECX/ IPE has become the leading CO2 emissions exchange in Europe with 38 million tonnes traded in the first five months of activity;
» ECX, IPE and Powernext will co-operate to offer futures and spot contracts on an integrated screen.
4
Development of the EU Emissions Market
Futures market
Spot market OTC derivatives
Forward market
First forward trade in February 2003
First cash-settled OTC trade in
February 2005
First spot trade in February 2005
ECX IPE futures contract launched on 22nd April 2005
5
Market Development
• Forward trading began in February 2003 and 10 MtCO2 were traded in 2004 –approximately 140 million tonnes CO2 traded first in the 9 months of 2005;
• Market infrastructure:– Increasing numbers of market participants – 50-60 now active;– 9 brokers;– 7 exchanges;
• All 25 National Allocation Plans now approved by EU Commission;
• 11 National registries currently operational (fully or partly).
• Companies from all industrial sectors included in EU Emissions Trading Scheme have traded at ECX/IPE.
6
Price and volume ECX
-
200,000
400,000
600,000
800,000
1,000,000
1,200,000
1,400,000
1,600,000
22 Apr 09 May 23 May 07 Jun 21 Jun 05 Jul 19 Jul 02 Aug 16 Aug 31 Aug 14 Sep
-
5.00
10.00
15.00
20.00
25.00
30.00
35.00
5 months activity = 42 million tonnes CO2 traded on ECX
7
Market Shares
53%
30%
17%
OTC ECX/ IPE Other Exchanges
8
IPE ECX CFI volatility
ECX CFI volatility vs. settlement price
0.00%
10.00%
20.00%
30.00%
40.00%
50.00%
60.00%
70.00%
Vo
lati
lity
(%
)
-
5.00
10.00
15.00
20.00
25.00
30.00
35.00
Pri
ce
(€
)
Settlement Price
Volatility
9
Correlation with other IPE markets
Energy Product Price Correlation
40
45
50
55
60
65
70
75
80
85
4/22
/200
5
4/24
/200
5
4/26
/200
54/
28/2
005
4/30
/200
5
5/2/
2005
5/4/
2005
5/6/
2005
5/8/
2005
5/10
/200
5
5/12
/200
5
5/14
/200
5
5/16
/200
5
5/18
/200
55/
20/2
005
5/22
/200
5
5/24
/200
5
5/26
/200
5
5/28
/200
55/
30/2
005
6/1/
2005
6/3/
2005
6/5/
2005
6/7/
2005
6/9/
2005
6/11
/200
5
6/13
/200
5
6/15
/200
5
6/17
/200
5
6/19
/200
56/
21/2
005
6/23
/200
5
6/25
/200
5
6/27
/200
5
6/29
/200
57/
1/20
05
7/3/
2005
7/5/
2005
7/7/
2005
7/9/
2005
7/11
/200
5
7/13
/200
5
7/15
/200
5
7/17
/200
5
7/19
/200
5
7/21
/200
57/
23/2
005
7/25
/200
5
7/27
/200
5
7/29
/200
5
7/31
/200
58/
2/20
05
8/4/
2005
8/6/
2005
0
5
10
15
20
25
30
35
40
45
NBP Winter05 (p/th) Power Winter05 (£/MWh) Brent Dec05($/bbl) CFI Dec05 (€/t)
10
Correlation with other IPE markets (2)
Spark Spread vs Carbon Price
4
5
6
7
8
9
10
11
4/22
/200
54/
24/2
005
4/26
/200
54/
28/2
005
4/30
/200
55/
2/20
055/
4/20
055/
6/20
055/
8/20
055/
10/2
005
5/12
/200
55/
14/2
005
5/16
/200
55/
18/2
005
5/20
/200
55/
22/2
005
5/24
/200
55/
26/2
005
5/28
/200
55/
30/2
005
6/1/
2005
6/3/
2005
6/5/
2005
6/7/
2005
6/9/
2005
6/11
/200
56/
13/2
005
6/15
/200
56/
17/2
005
6/19
/200
56/
21/2
005
6/23
/200
56/
25/2
005
6/27
/200
56/
29/2
005
7/1/
2005
7/3/
2005
7/5/
2005
7/7/
2005
7/9/
2005
7/11
/200
57/
13/2
005
7/15
/200
57/
17/2
005
7/19
/200
57/
21/2
005
7/23
/200
57/
25/2
005
7/27
/200
57/
29/2
005
7/31
/200
58/
2/20
058/
4/20
058/
6/20
058/
8/20
058/
10/2
005
8/12
/200
58/
14/2
005
8/16
/200
58/
18/2
005
Sp
ark
Sp
read
Pri
ce (
£)
10
15
20
25
30
35
Car
bo
n P
rice
(€)
Spark Spread CFI Dec05 (€/t)
How can you trade ECX CFI futures Contracts on IPE?
• Trade directly as an IPE Member; or
• Order-Route as a customer of an IPE Member or a Broker electronically (or place orders by telephone);
ABN AMRO Futures*
Accord Energy
ADM Investor Services International*
Amerex
Atel Trading
Bache Financial*
Banco Santander*
Barclays Capital*
Bear Stearns International*
BHF Bank*
BNP Paribas Commodity Futures*
BP Gas Marketing
Breakwater Trading
Calyon Financial*
Cargill Investor Services*
Climate Change Markets*
Credit Suisse First Boston (Europe)*
Deutsche Bank*
Dresdner Bank*
E.On UK
Electrabel
Fimat International Banque*
Fortis Bank Global Clearing*
Goldman Sachs*
ICAP*
JP Morgan Securities*
Kyte Broking
MAN Financial*
Marquette Partners (UK)
Merrill Lynch International*
Merrill Lynch Commodities (Europe)
Mizuho Securities*
Morgan Stanley & Co International*
Optiver
Refco Overseas*
Saxon Financials
Scottish Power Energy Management
SEB Bank*
Sempra Energy Europe
Shell Energy Trading
Shell International Trading & Shipping
Smartest Energy
Spectron Energy Services
Starmark Trading
TFS Derivatives
Tradelink
UBS*
Members in ECX CFIs on IPE
*Entities marked with a star are able to offer clearing services to third parties.
13
IPE ECX CFI futures - Contract specifications
Settlement Physically settled against transfer of EU allowances.
Settlement cycle Quarter-ends on Mar / Jun / Sept / Dec cycle to Mar 2008 – first expiry in December 2005.
5 annual contracts – Dec expiry 2008 – 2012.
Contract size 1000 tonnes CO2 (i.e. 1000 allowances).
Tick size €0.05 per tonne (i.e. €50.00 per contract).
Trading hours 8:00am to 5:00pm (GMT/BST).
Closing price Weighted average of trades during the daily settlement period.
Fees Members €2 per lot per side, Non-members €2.5 per lot per side. LCH.Clearnet clearing fee €1 per lot per side.
14
Other information
• INFORMATION VENDORS CODES:
Bloomberg (MOA/EMIT) Reuters (0#CFI)
CMS (UX) IDC (<17>t, UX)
CQG (UX) IPE Energy Live (LUX)
E-Signal/Futuresource (LUX) Telerate (GB@UX)
• VAT:Interim TMO status received – transfers between the Member and the LCH.Clearnet will be zero-rated for VAT purposes.
15
Chicago Climate Exchange
• Voluntary, legally binding pilot greenhouse gas trading program;
• Includes emitters and specified offset projects in North America;
• All six greenhouse gases included (converted to CO2e);
• Emitters commit to cut 1% per year (achieve -4% in 2006);
• Over 100 international companies have signed up for CCX membership inc Dupont, IBM, Stora Enso, Rolls Royce, Motorola, American Electric Power, Confederation of British Industry etc.
16
Looking ahead..
• By year end integrated platform ECX/ IPE (futures) and Powernext (spot);
• ECX/ IPE plan to launch more emission derivatives: options and spreads;
• EU ETS will foster the development of the CDM and JI market;
• Carbon becomes an integrated part of the energy portfolio;
• Linking Europe to other trading schemes.
17
Legal disclaimer
• ECX/ IPE is seeking recognition from the Commisione Nazionale per la Societa e la Borsa (CONSAB) as a foreign market under Article 67(2) of Consolidated Finance Act. The application is currently pending;
• The information given in this presentation is not, and is not intended to be, an invitation to access the market directly or via a non-Italian member;
• The information given in this presentation is not, and is not intended to be, a solicitation or an offer to buy or sell any of the products that are traded on the market.
18
Thank You!
For more information, please contact: • Albert de Haan, Commercial Director [email protected]• Sara Stahl, Carbon Economist [email protected]
Telephone: +31 (0)20 799 7990
Website: www.ecxeurope.com