Nasdaq to Get In on Emissions Contracts

New Energy-Trading Platform Aims to Capitalize on a Hot Market
By DOUG CAMERON

CHICAGO -- Nasdaq OMX Group Inc. is joining the push by financial exchanges into trading emissions contracts designed to reduce the global output of greenhouse gases.
The trans-Atlantic exchange operator is expected to announce Wednesday that it will use businesses acquired from Nord Pool, the Norwegian power exchange, to create a new Nasdaq OMX Commodities unit.

The launch of an energy-trading platform comes amid increasing interest in emissions contracts, with both U.S. presidential candidates supporting the cap-and-trade system implemented in the European Union and elsewhere.
Under such systems, companies are given allowances to emit limited amounts of carbon dioxide. Those that don't use all their allowances can sell them to others that exceed their limits.
Robert Greifeld, Nasdaq OMX's chairman and chief executive, said the commodities unit will develop standardized products for European and U.S. clients looking to manage and trade allowances for emissions such as carbon dioxide and sulfur dioxide.
"We believe a standardization of contracts is necessary for the carbon market," he said, pointing to issues such as unit size that remained to be resolved. "Things need to be perfected, and then the carbon market can develop in ways we don't envisage today."
Mr. Greifeld said most emissions trading in the Nasdaq contracts initially will be in over-the-counter contracts rather than exchange-traded products, although these would be centrally cleared.
Nord Pool already offers carbon-dioxide contracts under the European Union trading scheme, as well as a global carbon contract through the Green Development Mechanism organized by the United Nations.
The global carbon-trading market was valued around $64 billion last year, according to the World Bank. Point Carbon, an industry consultant, estimates this could rise to $3 trillion by 2020 if large polluters such as the U.S. and China introduce cap-and-trade schemes.
Bart Chilton, a commissioner at the Commodity Futures Trading Commission, forecast earlier this year that carbon could emerge as the largest commodity asset class.
The potential has attracted a series of ventures led by the four-year old Chicago Climate Exchange, which operates a voluntary cap-and-trade system in the U.S. alongside a regulated futures exchange and the European Climate Exchange.
CME Group Inc. entered the market in August after acquiring the Green Exchange as part of its purchase of Nymex Holdings. Eurex, the derivatives arm of Deutsche Börse AG, is active in the market through a deal with the European Energy Exchange.
Nasdaq OMX acquired Nord Pool's clearing and consultancy businesses as part of this year's purchase of OMX AB, the Stockholm-based exchange and technology group. Nord Pool will remain a standalone power exchange controlled by a group of regional utilities, but clear through Nasdaq OMX Commodities.
Mr. Greifeld said the "pioneer status" of Nord Pool as the largest European energy exchange by volume would see it continue its push outside Scandinavia after its successful launch of products in Germany.
Write to Doug Cameron at doug.cameron@dowjones.com