Starting in late August, the New York Mercantile Exchange (NYMEX) will offer futures contracts for carbon dioxide (CO2) allowances under the coming Regional Greenhouse Gas Initiative (RGGI), a CO2 cap-and-trade program for 11 Northeast states. The Green Exchange first announced the coming futures market in May. The new trading products will be the first-ever exchange tradable CO2 allowances created by a U.S.-based government compliance regime.
The Green Exchange will offer CO2 allowances futures contracts for the next day's trading starting August 24. Contracts will be available for electronic trading on the CME Globex trading platform. Physical delivery of the contracts will be administered by RGGI's CO2 Allowance Trading System, NYMEX officials said. The timing means the Green Exchange will be offering futures trading a full month before the first system-wide RGGI allowance auctions begin September 25.
"This allows the affected sources to begin to get some price transparency before the auctions start," Tom Holleran, vice president for marketing at NYMEX and a Green Exchange principal, said in an interview. The Green Exchange marks North America's first entry into carbon trading under government mandate.