UK IPE mulls weather, emissions, power contracts

LONDON - - The London-based International Petroleum Exchange is looking at launching weather derivatives and greenhouse gas emissions trading contracts as well as reviving its UK electricity futures market, chief executive Richard Ward said.

"We are in discussions with a partner about how we can develop a weather business on the IPE," Ward said.

"We are actively looking into the emissions market again and electricity's back on the agenda. We are seeing whether the market is ripe for a relaunch of the electricity contract."

The IPE, which trades Brent crude, gas oil and natural gas, suspended its electricity futures contract in March 2002 after it attracted little interest amid tough competition from over-the-counter brokers.

The exchange also faces competition from the recently merged UKPX and APX power bourses.

While these exchanges have attracted reasonable volumes in short-term trading, they have struggled to establish liquid markets in longer-term forward contracts.

The UKPX said recently that its volumes had improved after the launch last year of revamped futures contracts.

Carbon dioxide emissions trade is set to take off with the launch early next year of the European Union emissions trading scheme, the centrepiece in the bloc's efforts to meet its obligation to curb pollution under the Kyoto protocol on climate change.

Few trades have been done so far, all through brokers, but last month Austria's EXAA power exchange said it wanted to start trading carbon dioxide emission certificates. Weather derivatives trading has also been thin. London's Euronext.

Liffe financial market launched European weather derivatives contracts in late 2001 but suspended them last summer after just a single deal was done.