London: Two Asian exchanges to trade permits for greenhouse gas emissions are to be set up soon, featuring major companies from the start, according to the company that runs a US and European exchange.
Britain’s Climate Exchange Plc expects to set up voluntary exchanges in India and China in the near future, its chief executive Neil Eckert told Reuters.
The exchanges will help firms in the region cut their carbon footprints and could add to pressure on their governments to sign up to international agreements to cut emissions.
Climate Exchange is in talks to set up a Chinese and Indian exchange — the first of their kind in the country — with local unnamed commodities exchanges. A formal agreement with a local commodities exchange in India could be just two months away, Eckert told Reuters.
On voluntary exchanges firms agree to cut their pollution of carbon and other greenhouse gases linked to global warming by an amount that then becomes legally binding.
If they cut emissions more than targeted, they can sell the credits this generates to firms that over-pollute.
Carbon exchanges will help firms cut their carbon footprints and could pressurize governments to sign global agreements to cut emissions
The battle to set up regional carbon exchanges around the world is intensifying. On 25 June, Dubai’s state-run commodities centre said it planned to set up an exchange for trading permits with fellow AIM-listed firm EcoSecurities.
Climate Exchange is close to getting enough Indian firms signed up to formally launch the exchange, Eckert said. Founder companies will include “major, major industrial firms”, he said.
The exchanges will be modelled on the Chicago Climate Exchange (CCX) in the US, which Climate Exchange runs and which started with 14 members, and trade could take place between the three voluntary exchanges.
CCX started in 2003 and now has over 300 members, including Intel and Kodak. Public bodies, even cities, can also join and agree to cut their emissions. Last Friday (22 June) the House of Representatives, one of the US government’s legislative chambers, joined the CCX and agreed to cut its carbon footprint by 50% within 10 years.
Climate Exchange also runs the European Climate Exchange (ECX), which does 80% of the exchange-based trade in European Union carbon permits.
Countries that are not part of the Kyoto Protocol, such as India and China, do not have exchanges to trade credits as they are not required to reduce emissions by targets set under Kyoto.
It will be easier to create a compulsory exchange for trading in credits — if India and China do sign up to international agreements to set emissions targets — if a voluntary exchange is already in place. Climate Exchange hopes to run such an exchange as the trading volumes would be much higher and more lucrative if all companies are bound by emission targets.
But that is at least five years away in India and China, according to Eckert, and a voluntary system is the best way for big firms to show they are helping the environment before then.
Although a Chinese exchange is further off than India — and the exact locations have not been decided — Climate Exchange is in talks with large Chinese firms about becoming founder partners to an exchange.
“With the Beijing Olympics and some of these companies being listed in London and New York they face a lot of public and corporate pressure to help the environment,” Eckert said.