In the latest effort to kickstart carbon trading in India, the National Commodity and Derivatives Exchange Ltd. (NCDEX), a commodity exchange, has asked that the ministry of envirnoment and forests be the market regulator.
The lack of a regulator has been one of the factors that has impeded the setting up of a carbon trading exchange in India.
“We placed a proposal three days ago,” said Narender Rathore, vice-president, Products Group, NCDEX. A ministry official, requesting anonymity, confirmed the receipt of such a proposal, but declined to elaborate.
Cashing in on: Select developed countries have agreed to cut their emissions by 5% of their emission levels prevailing in 1990.
Carbon credits are generated when a project employs technology that reduce carbon dioxide emissions, generated typically when fossil fuel, such as coal, oil and gas, is consumed. Select developed countries had agreed to cut their emissions by 5% of their emission levels prevailing in 1990. These targets can also be met by purchasing carbon credits and the surplus credits can be traded on special exchanges.
Major commodity exchanges have been in the race to set up a carbon trading exchange in India, with the Multi Commodities Exchange, another Indian exchange, having had several rounds of talks with the Chicago Climate Exchange, a United States-based exchange trading in greenhouse gas emission offsets.
“We have all the technology ready for having carbon trading, but government just isn’t deciding on a regulatory body to monitor carbon trade,” said Rathore.
In addition, the government is yet to evolve a consensus on whether a carbon credit is a commodity or a financial instrument, which would determine whether carbon credits will be traded on a commodity or stock exchange.
The rush to have a carbon exchange in India is primarily led by expectations of burgeoning market for carbon credits emerging out of India, because a major chunk of clean development mechanism (Cdm) projects are coming in from India.
“As the MoEF is anyway responsible for clearing Cdm projects from India, and has the necessary expertise in judging the quality of projects, it makes sense for them to be regulators,” said Rathore.
Ram Babu, managing director, CantorCO2e India Private Ltd, a firm that trades in carbon credits said it’s widely expected that the next decade will see major polluters such as Australia and the United States undertaking binding emission cuts, with the global warming sub-committee of the US Senate recently proposing legislation that would, by 2050, reduce America’s output of greenhouse gases by 62% of the levels prevailing in 2005.
The European Union also aims to bring down emissions by 20% during the same period. Though he says the market will expand, Babu isn’t too optimistic on having an exchange now.
“I don’t think there’s that much of an urgency to have an exchange in India now because the volumes are too small,” he said. “But, this move to go to the MoEF, seems like a desperate measure to bring about a trading platform in India. I believe the trading arrangements that are happening now are quite alright.”