September 07, 2008
MCX launches futures in carbon credits
A fortnight after the government notified futures trading in carbon credits, Multi Commodity Exchange has launched the facility for the first time in India. Branded as ECX CFI MiniSM, there will be 5 contracts of carbon credits with expiry on 15th of respective expiry months starting from December 2008 through December 2012.
The trading unit will be of 200 tonnes, where each tonne of carbon credit being an entitlement to emit one tonne of carbon dioxide equivalent gases.
Mr Joseph Massey deputy MD of MCX said that “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.”
Mr Lamon Rutten joint MD of MCX said that “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.”
Carbon trading is carried out under an UN mandated international convention on climate change. Under the Kyoto protocol, carbon credits are issued by the clean development mechanism executive board, the highest international body to register projects and issue credits. 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 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.
The MCX initiative makes it Asia’s first ever commodity exchange and among the select few in league with the Chicago Climate Exchange and the European Climate Exchange. MCX entered into a strategic alliance with Chicago Climate Exchange in September 2005 to initiate carbon trading in India.
