Carbon Derivatives Market in India

1684 WordsDec 8, 20087 Pages
Carbon Derivatives Market in India Executive Summary Energy security, resource conservation, reduction of pollution and protection of natural habitats has got governments all around the world interested in carbon trading. Investor interest in the emerging global carbon credit market has created apt conditions for risk management products, ranging from insurance to derivatives. The carbon trading market allows polluting companies to pay others to cut carbon emissions on their behalf so as to meet the reduction targets set by Kyoto Protocol. A high volume of trading in the carbon derivatives market helps price discovery and liquidity, and in this way helps to set a clear price signal which helps businesses to plan investments. India has…show more content…
Similarly, the buyer can also hedge his position against rise in carbon credit prices. A high volume of trading in this market helps price discovery and liquidity, and in this way helps to keep down costs and set a clear price signal which helps businesses to plan investments. Advantage India India is the second largest supplier of CERs in the world after China. Together they control around 82% of the market. The advantage with these two countries is that they have no obligation to reduce emissions under the Kyoto agreement and hence they have the opportunity to invest in GHG reducing projects to earn carbon credits which can further be sold to developed countries that have an obligation to reduce emissions. [pic] Out of the 978 projects that have been registered under Clean Development Mechanism (CDM) of the United Nations Framework Convention on Climate Change (UNFCCC), 332 projects are from India. 543 projects are at various stage of validation or registration. All these projects from India are expected to yield close to 400 million CERs by 2012. The market to buy and sell such credits is surging especially in Europe where most countries have signed the U.N. Kyoto Protocol to curb CO2 emissions. The value of global carbon markets grew by 80 percent from 2006 to 2007, reaching $60 billion in 2007, according to consulting group Point Carbon. In
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