Futures trading in carbon credits soon in India

India's commodity bourses -- Multi-Commodity Exchange and National Commodity and Derivatives Exchange -- are gearing up to launch futures trading in carbon credits.

Both MCX and NCDEX will soon submit proposals to the Forward Markets Commission requesting clearances for carbon credits trading.

However, Consumer Affairs Ministry officials said futures trading in carbon credit can be launched in India only after the Parliament passes the Forward Contracts (Regulation) Amendments Bill, 2006.

A Ministry official said today that the proposed amendment would allow commodity exchanges to trade in non-deliverable goods, including carbon credit.

The Bill amending the Forward Contracts Regulation Act is pending, as a parliamentary committee had suggested some changes, including a ban on agri-commodity futures, before clearing it in principle.

MCX and NCDEX officials said they are ready to launch carbon trading as and when the government grants approval.

"Whenever the government allows trading of intangible, we can launch emission trading," NCDEX Chief Strategist Narender Gupta said.

Carbon credits basically seek to encourage countries to reduce their greenhouse gas emissions, as it

rewards those countries that meet their targets and provides financial incentives to others to do so as quickly as possible. The European countries and Japan are the major buyers of carbon credits. This is what makes trading in carbon credits such a great business opportunity.

The new generation of commodities would have a pivotal role exchanges have an important role to play in price discovery of all renewable and non-renewable natural resources for most optimal resource allocation. At present, the trading in carbon takes place on two stock exchanges, the Chicago Climate Exchange (since 2003) and the European Climate Exchange (since 2005).

A recent study by World Bank Study clearly outlines the market potential in new age commodities -- Carbon-trading volumes have exploded from just 10 million tons in 2004 to more than 600 million tons so far this year. The total market size for carbon trading worldwide is about $10 billion currently and is expected to be worth some $45 billion annually between 2008 to 2012.

The current global price for one tonne of carbon dioxide at the exchange hovers around $3.35. The total trade in this year's carbon futures as on 15 June stood at $ 43,885 while it was $6,63,300 in 2006.