NSE Explores Carbon Credit Market, Introducing Electricity Derivatives

The National Stock Exchange is exploring opportunities in electricity derivatives and the voluntary carbon credit (VCC) market to deepen its product portfolio as part of its transformation into a multi-asset stock exchange.

The world's largest derivatives stock exchange also plans to introduce derivative contracts based on the indices of the corporate bond index and government bond index, subject to clearance from regulators.

"We are evaluating the voluntary carbon credits market. There are only two markets at this time. There are about 26 million voluntary carbon credits available in India as of today, which can be monetised," NSE Chief Business Development Officer Sriram Krishnan told PTI.

He was in the city to participate in the Eureka Stock Broking organised Financial Conclave.

"We need to figure out how to build a market for these VCCs so that they can find their values. You need to monetise them, and of course, we also need to create a healthy market going forward, because India is producing such carbon credits every year. It is difficult to quantify, but it is estimated to be worth USD 150 million," Krishnan said.

Speaking about proposed derivative contracts on corporate bonds and government bond index, he stated that the exchange was awaiting clearance from the regulators.

Krishnan said the bourse will continue to evaluate introducing more products on the commodity front.

Another bourse, the Indian Energy Exchange (IEX), has also announced plans to explore business opportunities in the voluntary carbon market and has established a wholly-owned subsidiary for this purpose. 

The government plans to develop the Indian Carbon Market (ICM), where a national framework will be established to decarbonise the Indian economy by pricing the green house gas (GHG) emissions through trading of the carbon credit certificates.

The Bureau of Energy Efficiency, Ministry of Power, along with the Ministry of Environment, Forest & Climate Change, are developing the Carbon Credit Trading Scheme for this purpose and have also held stakeholder meetings.

According to a past Deloitte Economics Institute report, using its potential to "export decarbonisation" to the world, India could gain USD 11 trillion in economic value over the next 50 years by limiting rising global temperatures.