The Hindu Business Line : Carbon credit certificate trade overshoots target in NCDEX

Seeking balance
In four sessions, CER volumes touch 6.2 lakh, three times more than expected.
Trade mechanism does not allow global firms to buy CERs directly from domestic cos.

Priyanka Vyas

New Delhi, April 18 One week since certified emission reduction (CERs) began to be traded on the National Commodity & Derivative Exchange Ltd (NCDEX), it has overshot its target. In the first four trading sessions it has been able to garner Rs 15-20 crore on a daily basis. This is three-four times the trading volume the exchange had anticipated. However, industry players are not impressed with the volumes and are looking for certain clarifications.

“In four sessions, the volume of CERs traded on NCDEX has touched 6.2 lakh, which translates into Rs 15-20 crore of trading volumes on a daily basis. This is three times more than the volume we expected at Rs 3-5 crore daily,” said Mr N.S. Rathore, Vice-President, NCDEX.

The price of CERs on the NCDEX on Thursday was around Rs 1,038.60 for December 2008 contracts as against Rs 1,030.89 on the spot market. “Within days since the trading started, the price on the Indian exchange is equivalent or higher than the price being traded on the international exchanges,” said Mr Rathore.

However, several companies into carbon trading are still unclear on the physical delivery mechanism of CERs being traded on the NCDEX.

While the prices are lucrative, players are concerned about the fact that the mechanism — which is still at a nascent stage — does not allow international companies to buy CERs directly from domestic companies. They can buy only through their subsidiaries in India.

“The exchange price becomes a reference point for a lot of bilateral deals that take place under which Indian companies sell CERs to European companies. However, since international companies requiring to offset their emissions by buying it from Indian companies are unable to participate, it does not involve physical delivery of CERs, but is more driven by participants from the price discovery point of view,” said Dr Ram Babu, Managing Director, CantorCO2e, a brokerage firm.

“By trading in the futures market, one can lock-in the price of CERs by hedging against any volatility. But with the physical delivery mechanism not being very clear, there remains a concern,” said Mr Suresh Iyer, Deputy General Manager, JSW Ltd.

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