NCDEX commences Carbon trading

Mumbai, Apr 10 (UNI) The National Commodity and Derivatives Exchange Limited (NCDEX) today launched the futures contract for Certified Emission Reduction (CER) with the first contract for December 18 traded in the exchange yielding Rs 95 lakh.

The contract was launched by Forwards Markets Commission Chairman B C Khatua who sought a hand holding assistance to the emerging carbon trading in the country to enable potential projects derive better price.

He said, India was the first developing country to offer a hedging tool for CER on the platform of NCDEX. CER was a Kyoto protocol compliant emissions instrument under the Clean Development Mechanism of the UN framework convention on Climate Change.

Mr Khatua also said, together with carbon related product already launched on the platform of another commodity exchange, MCX, the NCDEX contract would mark the introduction of environmental products in Indian Commodity futures market. He hoped that project developers and other potential inventors would actively participate in the market.

Currently India had carbon trading projects worth Rs 1000 crore and the potential was estimated at around Rs 40,000 crore.

NCDEX Managing Director and CEO P H Ravikumar said, CER futures contract marked an important milestone for the exchange and the contract launched today would help establish a Benchmark price in CER market. The Exchange had taken care to ensure that the design of the contract was relevant to the Indian participants to trade and hedge their stream of CERs, he added.

CER contract would be traded in multiple of one lot of 500 CERs each. The tick size is Re 0.20 and final settlement price would pertain to guaranteed deliverable CERs. The client wise position limit was 11,000 lots, whereas the memberwise position limit was 66,000 lots. Initially, only one contract expiring in December 2008 had been launched and further contracts would be added in the next few months.

India accounted for 15 per cent of CERs from registered projects under the Clean development Mechanism. Out of the 988 projects that had been registered under the CDM, 324 were from India. Another 550 projects were in the pipeline at various stages of validation or registration. By 2012 projects from India were expected to yield around 400 Million CERs.

Before being brought under the futures contracts, CERs were being traded bilaterally in the country. These form of trade suffered from certain drawbacks and tend to be highly customised and opaque, Mr Ravikumar said. In the absence of a price discovery mechanism, sellers were not able to get a fair value for their CERs. This anomaly would be removed by the futures contracts.

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