Futures trading in carbon credits kick started on a positive note on Thursday on the leading agriculture commodity bourse in the country, the National Commodity and Derivative Exchange (NCDEX).
At 3 pm, December contract was trading up by 1.21% at Rs1,007 per certified emission reduction (CER). The spot prices stood at Rs 1,010.04 per CER.
“Carbon credit futures is a development product. It would provide transparency to markets and help producers earn remunerative returns out of environmentally clean projects,” NCDEX chief executive P.H. Ravikumar said.
Since morning, about 230 contracts have been exchanged on the trading platform.
Forward Markets Commission chairman B.C. Khatua said: “NCDEX is the second exchange in the country after MCX which started carbon credits futures. Carbon trading will grow in the coming days amidst the burning issue of climate change”.
The Multicommodity Exchange of India, or MCX, started futures trading in carbon credits by launching five contracts in January.
Carbon credits are generated by companies in the developing world by using cleaner technologies and, thereby, saving on energy consumption. This consequently reduces their greenhouse gas emissions, analysts said.
With each reduced tonne 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 the United Nations Framework Convention on Climate Change (UNFCCC).
India would account for 14.69% of the expected annual number of CERs from the registered projects under the Clean Development Mechanism (CDM) of the UNFCCC, experts said.
Of the 978 projects that are registered under CDM, 332 are from India. Another 543 projects are in pipeline at various stage of validation.
By 2012, these projects are expected to yield around 400 million CERs.
A government notification on 4 January had paved the way for futures trading in CERs by bringing carbon credits under the ambit of tradable commodities.
In the developed world futures contract of CERs are traded on Nordpool, European Climate Exchange, European Energy Exchange and the New York Mercantile Exchange’s Green Exchange.