Australia’s energy sector is going through a dramatic shift as the country strives to become a net-zero economy by 2050. With renewables now accounting for more than 30% of Australia’s electricity generation, organisations are making greater use of derivatives to manage energy risks, realise opportunities and accelerate decarbonisation efforts.

To support this increasing demand, Australian Securities Exchange (ASX) is seeking to expand its electricity and gas ecosystem to include more gas futures and new carbon derivatives. This ecosystem provides companies with the building blocks for decarbonisation while offering liquidity, price transparency and risk management tools.

ASX runs one of the world’s most liquid electricity futures markets, facilitating over A$127 billion traded in face value during 2022. This market has grown since 2015 and now trades over 700% of the underlying power consumption in Australia’s National Electricity Market. 

Now ASX seeks to expand its presence in the gas derivatives market with the upcoming listing of the Wallumbilla Gas futures contract (subject to regulatory approval). This addition will complement the existing Victorian Declared Wholesale Gas futures contract and provide more risk management tools for companies.

Reducing emissions with carbon derivatives

ASX are also exploring the potential to improve market liquidity and price discovery by introducing carbon derivative products to the product suite.

These new products will add to Australia’s growing pool of solutions that promote carbon reduction while providing economic incentives to do so. 

According to John Connor, CEO of Carbon Market Institute (CMI), market-based mechanisms have a crucial part to play in scaling up climate action and ensuring an economically efficient shift to net-zero.

CMI aims to accelerate the shift to net-zero by building capacity, promoting best practice and supporting policy aligned with UNFCCC Paris Agreement climate goals. In 2022, ASX became a corporate member to support the Australian community in driving this transition.

“A transition that’s economically viable helps ensure that Australian businesses remain competitive,” says Connor. “That’s why we support efforts by ASX to develop products that assist companies in meeting their emissions targets while encouraging investment in decarbonisation projects.”

A variation of this article was originally published in the May 2023 edition of E-world Magazine (see page 42).  Supporting the E-World Energy and Water Congress in Essen Germany on 23 to 25 May 2023.  The congress is the meeting point for the European energy industry. Exhibitors from all over the world present sustainable technologies and intelligent services for the energy future.