The New York Mercantile Exchange plans to offer contracts for trading carbon dioxide, the main greenhouse gas blamed for global warming, and other heat-trapping emissions.
The entry by Nymex Holdings Inc. into the sector may herald the start of fierce competition among energy exchanges to serve a multibillion-dollar trading market for carbon emission allowances.
The Chicago Climate Exchange has been the first in the United States to create an exchange for trading carbon credits, but Nymex hopes to use its relationships with energy companies and traders to snatch business from the Chicago exchange.
"The interplay between the existing energy marketplace and the environmental one is very strong," said Bob Levin, senior vice president at Nymex. "It's a very natural place for us to be and much of the industry sees it that way."
Levin said he couldn't say when Nymex might launch these products.
The United States, unlike the European Union, has yet to establish a mandatory nationwide cap on greenhouse gases. But many expect that by 2010 Congress will impose a cap and allow individual companies to comply by purchasing allowances in place of cutting actual emissions.
Even without a mandatory cap, U.S. companies have been trading "voluntary" allowances. A growing number of companies in the United States are buying these allowances to offset their own global warming emissions, either to promote a "green" public image or to gain experience in allowance trading before they must operate under a mandatory cap.
Levin said that Nymex will offer trading of both kinds of credits.
"I don't think we really distinguish," he said.
Nymex is the world's largest energy futures exchange. Large energy producers and consumers go there to hedge their market risk, while speculators make bets on the price of crude oil, natural gas, gasoline, heating oil, electricity and several other energy commodities.
More recently, Nymex has offered futures contracts for emissions of sulfur dioxide and nitrogen oxide emissions. The federal government created a regulatory market for those emissions in the 1990s to help power plant operators comply with more stringent air pollution restrictions.
Levin said Nymex considers environmental and alternative energy trading a growth area. In particular, he said trading in renewable power, such as wind and solar, will surge.
"Alternative energy offered to consumers and businesses is going to be very popular," he said.