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A Local Culinary Adventure: inspired by Halifax's Seaport Market | SaltWire #cooking #cookingtipsLONDON - Energy companies, hedge funds and commodity traders are stepping up their use of financial products that let them bet on the weather, as they seek to protect themselves against - or profit from - the increasingly extreme global climate.
Weather derivatives were born in the late 1990s. Driven in part by U.S. energy company Enron, the market expanded and attracted speculators who were hunting for assets divorced from wider financial markets, before shrinking after the 2007-2008 financial crisis. Climate change and the El Nino weather phenomenon combined to make the northern hemisphere summer of 2023 the hottest ever recorded, according to the European Union Climate Change Service. Extreme weather has been a constant this year, causing devastating floods and wildfires around the world.
Ski resort operators can hedge against the risk that it does not snow enough, or music festivals protect themselves against rainfall. Typically, it is big reinsurance companies or major hedge funds such as U.S. billionaire investor Kenneth Griffin's Citadel on the other side of the trade. Matthew Hunt, head of the UK power desk at renewable energy company Statkraft, said the Ukraine war highlighted how fragile energy supplies could be. He said he uses the"really useful" derivatives to hedge against the risk that not enough wind power will come on to the grid.The market remains small compared with its commodity-linked cousins.
"Everyone was worried about how much oil is coming out of the ground. Now people care about how much wind, how much solar," Whitehead said."Unless businesses are convinced that this is a necessary activity - and that may be hard - the futures market will struggle to grow beyond a select group of companies and traders."
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