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In a landmark initiative that will enable direct trading of Carbon Credits to take off in India, Multi Commodity Exchange (MCX) – the country’s biggest commodity exchange – on 21 January launched futures trading in Carbon Credits (ECX-CFI MiniSM). This pioneering initiative at MCX makes it Asia’s 1st ever commodity exchange, and among the select few in league with the Chicago Climate Exchange and the European Climate Exchange.
Commenting on the launch Mr. Joseph Massey, DMD, MCX, said “Launching of carbon credit futures on the Indian trading platform would provide transparency to markets and help producers earn remunerative returns out of environmentally clean projects.” Trading in new generation commodities like carbon credits has placed MCX on the global map of innovative exchange for providing global products to the India Industry.
Carbon Credits are generated by enterprises in the developing world by using cleaner technologies and, thereby, saving on energy consumption. This consequently reduces their greenhouse gas emissions. For each reduced ton of carbon dioxide emission, an organization receives a carbon emission certificate, which it can sell, either immediately or through a futures market, just like any other commodity. Carbon trading is carried out under a UN-mandated international convention on climate change.
Mr. Massey further stated that said, “Indian companies have been at the forefront of innovation in use of technology and green field projects. Carbon futures is an ideal platform for these enterprises to get rewarded for adopting eco-friendly practices. With the launch of futures trading in carbon credits, we have taken another major step towards becoming the nation’s growth engines. It is truly a moment of great achievement for me to see that India is well on its way to join the ranks of the leading countries.”
Under the Kyoto Protocol, Carbon Credits, or carbon emission reductions certificates, are issued by the Clean Development Mechanism Executive Board, the highest international body to register projects and issue credits.
Mr. Lamon Rutten , JMD , MCX said “The market for trading in carbon emissions is estimated to be in the range of USD $60 billion to USD $70 billion annually. India is one amongst the global leaders having already generated close to 30 million carbon credits and has roughly another 140 million in the pipeline for sale, making it one of the largest beneficiaries in the carbon credit trade. The launch has provided a platform for Indian companies to be able to benefit from the adoption of cleaner technologies.”
MCX is a pioneer in Carbon Credit space in the country wherein it conducted various training and educational programs related to Carbon Credits in order to make the market more vibrant. As part of this, MCX entered into a strategic alliance with Chicago Climate Exchange (CCX) in September 2005 to initiate carbon trading in India. With India supposed to be a major supplier of Carbon Credits, the launch of Carbon Credits is expected to ensure better price discovery of Carbon Credits, besides covering risks associated with buying and selling. The tie-up between the two exchanges would provide immense scope and opportunity for the domestic suppliers in India to realize better prices for their Carbon Credits. Further, it would also integrate Indian market with the global markets to foster world’s best practices in domestic commodities futures market as related to emission trading.The trading unit of Carbon Credits is going to be in 200 tons, where each ton of Carbon Credit (Carbon dioxide Emission Allowance) being an entitlement to emit one tonne of Carbon dioxide equivalent gases. Concurrently five contracts of Carbon Credits will be available on the MCX platform with expiry in December 2008, December 2009, December 2010, December 2011 and December 2012 on 15th of respective expiry months.
