Decision on carbon credit trading likely in 4 months

The Centre is likely to vote on futures trading in carbon credit on MCX in the next four months, Point Carbon, a leading provider of carbon market information, quoted a senior official from the exchange.

According to Lamon Rutten, joint managing director of the exchange, the approval is likely to be gained in the next parliament session starting in July.

MCX has been trying to develop deliverable carbon contracts based on certified emission reductions, denominated in Indian rupees.

However, the launch had been kept in abeyance due to lack of clarity on whether carbon credits can be physically delivered.

Developed countries are bound by the Kyoto Protocol to cut greenhouse gas emission between 2008 and 2012 to at least 5 per cent of the 1990 level.

One way to cut emission is by buying certified emission reductions, or carbon credits, which are generated by clean development mechanism projects that reduce greenhouse gas emissions.

A project becomes eligible to sell one credit if it reduces 1 tonne of greenhouse gas emission. Buyers from developing countries with representatives in India and funds with offices in India will be able to buy these credits from domestic companies.

Direct foreign participation in buying or selling of commodities in exchanges is not permitted under the country's law.

MCX has already tied up with the Chicago Climate Exchange to supply expertise on carbon futures.

However, with the carbon market still in its infancy, an exchange is likely to be illiquid until a much greater volume of carbon credits arrive in the market, Point Carbon said.

India has the highest number of clean development mechanism projects registered with the carbon market regulator and has a potential of 20 billion certified emission reduction by 2012.