Europe's stringent biofuels policy is driving growing interest in region-specific ethanol and rapeseed oil hedging products, a senior executive for CME Group Inc (CME) in Europe said Friday.

The global exchange provider said its new German-Spec T2 ethanol contract cleared for the first time on CME Clearing Europe last week. The contract is one of several new products, including dollar-denominated rapeseed oil swaps, introduced in July.

Jeffry Kuijpers, CME's associate director of commodity services and products in EMEA, said the interest in such products shows the importance of region-specific biofuels offerings that cater to local policy requirements.

"Policy is clearly a big player in the ethanol and biodiesel market," he said. "The New York [ethanol] contract doesn't meet the full sustainability criteria required in Europe."

Biofuels are an integral part of the EU's effort to reduce carbon emissions by 20% by 2020 because much of this cut has to come from using more renewable energy, mainly biofuels, in transportation.

But Brussels has been forced to improve the sustainability criteria for biofuels after its policy came under fire from critics who say cultivating biofuels can cause environmental damage in parts of the developing world.

Kuijpers said the specifications of the new products have been designed to comply with German rules--the most demanding in the bloc--to meet industry demand, including from biofuels refiners, grain producers and consumers.

And to ensure its appeal to users from the oil sector, who blend biofuels with gasoline and diesel, CME is also offering rapeseed oil swaps in both dollar and euro denominations, to create margin offsets between its OTC WTI and Brent crude oil contracts.

"We've had demand from producers of biodiesel and users to be able to hedge inputs," said Kuijpers. "The dollar's still the currency of choice for most of the traders."

The launch of CME Clearing Europe this year was part of a broad push by the Chicago-based exchange operator to expand its global footprint amid growing competition from NYSE Euronext's $16.9 billion deal with Deutsche Boerse.

In May, CME and the government of Ukraine announced plans to launch a new futures market focused on the country's wheat market, with potential for other agriculture or financial contracts. Kuijpers said CME is looking to expand its offerings in the Black Sea region.

"There's always the argument to produce more products for the Black Sea," he said. "Any Black Sea product which would have ideally the backing of Russia, Ukraine, Kazakhstan and maybe Romania."