The Hindu Business Line : Rabo India unveils carbon credit trading product

Carbon credit trading helps companies meet internationally accepted emission control norms by purchasing these credits from companies who have surplus credits or have projects that generate carbon credits.

Rabo India Finance will help companies buy carbon credits, locate buyers and sell them to a final buyer. It will also provide a "credit wrap", i.e. guarantee the delivery of contracted carbon credits to the overseas buyer, besides providing hedging products.

Credit wrap

According to Mr Jotdeep Singh, Associate Director and Head, Renewable Energy & Carbon Credit, Rabo India Finance, "The credit wrap product will help an overseas buyer (European corporates or other entities) who does not have knowledge of Indian companies and credit risks. The overseas buyer faces a globally rated counter party (i.e. Rabobank), rather than a lesser-known developing country counter party. Rabobank will assume the credit risk - take the risks on account of the ability of the Indian company to execute the project in time and run it to specifications so that the contracted carbon credits can be verifiably generated year after year."

Mr Singh, said, "We are initially looking for projects with companies in the food and agri-business and renewable energy sector. We are looking for relatively larger deals - approximately one million CERs (certified emission reduction) over the contract period." Each CER stands for about one tonne of carbon dioxide reduction.

Mr Singh, said, "The credit wrap costs nothing, apart from very minor documentation and similar out-of-pocket costs involved in signing the Emission Reduction Purchase Agreement and related documents. We cover our cost of risk from the price difference between what we buy at and what we sell at."