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 a unique opportunity to become the leader in Carbon trading market. By 2012 emission reduction projects from India are expected to yield around 400 million CERs but it has to guard against the prowess of China to race ahead and capture the market.
Main Article
Carbon credit derivatives are contracts which allow the buyer and seller enter into a legally binding agreement to buy or sell carbon credits to be delivered at a future date at a pre-fixed price.
Energy security, resource conservation, reduction of pollution and protection of natural habitats are caused 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. There is a growing recognition of carbon as a commodity that can be traded in spot market, and in the form of other complex financial products, such as derivatives and exchange-traded funds. Currently the carbon credit trade in Asia is do ...