MCX plans carbon receipts registry

Move to boost trading of carbon credits on the exchange.

The Multi Commodity Exchange (MCX), the country's largest commodity exchange, is planning a sub-registry to keep accounts of carbon-emission reduction receipts (CERs) "" a certificate issued by the United Nations Framework Classification for Fossil Energy and Mineral Resources (UNFC) for reducing the release of obnoxious gases into the environment. 

WHERE THEY STAND Countrywise demand supply figures of CERs
Demand		Supply
UK	12	India	31
Other EU countries	32	Rest of Asia	14
The Netherlands	16	Brazil	13
Japan	21	Rest of Latin America	22
US	4	OECD	14
Australia	3	Africa	0
Canada	5	Others	6
New Zealand	7
(figures in %)

Currently, companies releasing such gases can sell these receipts through UNFC. But, CER trading in futures will require a sub-registry, which can keep a record of partly or fully sold CERs to companies that do not fully comply with the Kyoto Protocol norms.

At present, these receipts issued by UNFC, demanded by companies in the European Union countries, can be sold to member companies.

Joseph Massey, the deputy managing director of the exchange, said, "A company, which cannot install clean development mechanism (CDM) project as per the guidelines framed by the Kyoto Protocol, and continues to release obnoxious gases, including carbon dioxide (CO2), sulphur dioxide (SO2) etc, will require to buy CERs from those who have succeeded in reducing such gases." One CER is equivalent to a tonne of gas released.

In the European spot market, a tonne of the greenhouse gas is priced at around $8. On the MCX, however, the recently launched carbon credit is being traded at Rs 1,170 a tonne for December delivery.

As a custodian of CERs, a sub-registry requires to be reliable. Therefore, MCX is exploring the possibility of keeping such confidential records in order to avoid dependence on others.

Meanwhile, the exchange is also scouting for financial institutions, including non-banking financial companies, to trade large-scale in carbon credits, an intangible commodity.

India, as a net seller, is likely to generate CERs equivalent to 31 per cent of the world demand (valued at $8.5 billion) by 2012. The European Union is expected to consume around 32 per cent of the total CERs by 2012.

"At present, CERs are traded with mutual understanding between buyers and sellers without a reference price in the domestic market. But once the delivery norms are clarified, traders will have a good opportunity on the domestic platform," Massey said.