Asia’s carbon exchange grows after a slow start
Clean Development Mechanism projects in India kick-start process, more
activity expected from next year
Yaw Yan Chong
Activity on Asia’s first exchange geared towards trading Kyoto-related
carbon emissions credits should pick up next year as the second phase of the
pact goes into force, an exchange official said.
“It’s been a slow start, with most of the activity coming from Clean
Development Mechanism (CDM) projects in India,” N. Yuvaraj Dinesh Babu, the
carbon trading director with the Asia Carbon Exchange (ACX), said.
“There has been little activity from China as most parties prefer direct
bilateral deals rather than unilateral ones involving the exchange,” he
said.
However, Babu expects more activity from next year when the Kyoto Protocol
enters its second phase, from 2008 to 2012, and is in talks to list carbon
credit derivatives on stock exchanges in Singapore and India. He did not say
when this might happen.
Since its launch in mid-2005, the Singapore-based ACX has traded about 2.4
million Certified Emission Reduction (CER) credits.
A CER is equivalent to one tonne a year of reduced carbon dioxide-equivalent
greenhouse gas generated by an investment in a developing nation certified
by the United Nations.
About 214 million CERs had traded in Europe and Japan through September last
year, the official said. CERs on the exchange are currently trading at
around ?13-14 per tonne.
Activity was also curtailed by a meltdown in prices in Europe last year that
saw many players banking their credits rather than trading them on the
exchange and by the imminent expiry of Phase 1 of the Protocol by the end of
this year.
Over-the-counter brokers pegged both December 2008 delivery and the December
2008-December 2012 CER strip at just over 80% of the value of European Union
allowances (EUAs), which closed on the European Climate Exchange at ?16.45
on Thursday.
Carbon-credit trading, under the Kyoto Protocol to reduce global emissions
of greenhouse gases, operates under the principle where developed countries
can buy credits and exceed pre-agreed caps on emission levels by investing
in projects that cut emissions in developing nations.
The European Union’s allowance system emerged after the EU put in place
binding caps on carbon emissions, while a global market inKyoto-linked CER
credits generated as a result of UN-compliant clean-energy investment has
been slower to emerge.
The credits are then traded in an open secondary market where polluting
industrial owners can buy them to offset their emission levels or sell when
prices move up.
Babu said ACX also plans to introduce trading in credits involving non-Kyoto
signatories such as the US and Australia.
These credits are presently traded on the US Chicago Climate Exchange, where
power companies have voluntarily banded together to buy carbon credits to
offset their emissions. It traded about 5 million tonnes last year. REUTERS