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Mamuni Das

ACX follows 2-step process for buyers and sellers

New Delhi April 16 Driven by the need to have a transparent price discovery mechanism for carbon credits, Indian companies appear to be moving towards the online auction model for trading carbon credits or certified emission reductions (CERs), according to Asian Carbon Exchange (ACX).

ACX is the first firm to provide an online auction model for clean development mechanism (CDM) projects.

CDM is a term used specifically for those projects that are undertaken in developing countries and earn carbon credits under the Kyoto Protocol mechanism. Carbon credits from CDM projects are called CERs. Each CER represents reduction of one tonne of carbon dioxide emission.

MORE AUCTIONS

ACX, which claims to be the only functioning online auction platform for CERs, has seen an increase in the number of auctions it holds in a given time-period. "Till December '06, we were able to hold one online auction every 45 days. Now, we hold at least two online auctions every 45 days. We are trying to attain a target of one auction every 15 days," Mr K. Umamaheswaran, Manager-CDM & Carbon Trading, Asian Carbon Emission Management, told Business Line. This is also led by the fact that many new Indian projects have been registered at the UN during the past few months.

ACX follows a two-step online auction process for buyers and sellers for price discovery. The actual trading takes place later with signing of agreement. The next online auction, scheduled to for April 17-18, will see participation from "over ten buyers and several sellers, who would together put 2.3 million CERs up for sale".

Out of these 2.3 million CERs, about 0.7 million are from projects in China and Korea, while 1.6 million are from Indian projects. Till date, 13 projects have been sold on the ACX platform.

PRICE DISCOVERY

Buyers at ACX include traders, fund managers and companies that have green house gas reduction norms to meet under the Kyoto Protocol. Through auctions ACX discovers the price that buyers are ready to pay per CER. "For each CER, buyers were willing to pay about 12 (February '07 auction), 11.2 (January), 12.1 (December '06)," said Mr Maheswaran, while declining to share the figures for March 30 auction.

Several trading exchanges are available for carbon credits from European projects. There is dearth of such exchanges for carbon credits earned from projects undertaken in developing countries like India, China, Brazil, etc, leading to lack of transparency in discovering the actual market price of CERs.

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