The European Energy Exchange says it is close the creation of a derivatives market for trading carbon dioxide (CO2) allowances.

The EEX Exchange Council reports that it has passed all the necessary changes to its regulatory framework for the implementation of a CO2 derivatives market. Technically everything is ready for trading to start in October, however the EEX says it will not start the CO2 derivatives market before the tax authorities give participants legal certainty on the application of sales tax.

The EEX operates spot and derivatives markets for energy and energy-related products. Besides electricity and electricity futures and options, in March it began trading CO2 Emission Allowances.

The new carbon derivatives, known as European Carbon Futures, will enable price hedging for the EU Allowances trading up to 2012.