by a leading commodities exchange in Asia. IDEAcarbon will develop rated carbon products to trade on MCX platforms
IDEAcarbon has signed an agreement with the Multi Commodity Exchange (MCX) of India to co-develop rated carbon instruments for trade on the MCX exchange. The agreement aims to provide greater clarity, transparency and confidence in the Indian carbon markets.
Under the terms of the agreement, IDEAcarbon will also act as global strategic adviser for MCX on climate change policy and business opportunities in carbon markets.
Joseph Massey, MCX's Managing Director and CEO, said: “We are very happy to be working with IDEAcarbon, a global leader in carbon market standards and policy. We will integrate IDEAcarbon ratings into the design of carbon instruments we offer on the commodity exchange. We look forward to jointly developing transparent rated instruments for Certified Emission Reductions. Our ambition with IDEAcarbon is to create a truly liquid market for Indian sourced CERs.”
Shandi Modi, IDEAcarbon CEO, said: “This agreement represents a key step in developing the carbon market in India and internationally as, for the first time, trading will be based on rated carbon assets. Ratings will be an integral part of standardising carbon as a commodity and establishing it as a new asset class. We look forward to developing similar products with other exchanges and partners around the world.”
IDEAcarbon recently launched a wholly-owned subsidiary, the Carbon Ratings Agency, which will produce independent credit ratings for carbon assets covering a range of technologies and geographies.
The Agency is the first company to provide an independent, in-depth and comparable assessment of both regulatory risk and the less well understood market-internal risks of carbon assets. The carbon ratings will award scores ranging from AAA for the highest quality, lowest risk offset assets, through to C and D for the highest risk assets.
By 2020 the market for project based carbon offsets is estimated to grow to at least €200bn. However, substantial improvements in the way the market functions – especially in terms of transparency and risk management – will be needed to fulfil this potential. Risks must be clearly understood, articulated and managed. By providing instruments encompassing such information, MCX can ensure that buyers and sellers are confident about what they are buying.
The Carbon Ratings Agency's management team and ratings committee includes ratings experts, financial market professionals, UN climate change negotiators and former senior managers from development agencies such as the World Bank, a combination which ensures that the full range of risks facing carbon projects are taken into account by the ratings process.
MCX launched futures trading in carbon credits on June 9th 2008. The exchange has also launched November 8 and February 9 contracts, with expiry on 25th of the contract month. The trading lot, tick size and initial margin have been fixed at 250 tons, 50 paise and 6 per cent, respectively.
IDEAcarbon is an independent and professional provider of ratings, research and strategic advice on carbon finance. Its services are designed to provide leading financial institutions, corporations, governments, traders and developers with intelligence and analysis of the factors that affect the pricing of carbon market assets.
The IDEAcarbon team includes leading experts in the carbon and energy markets, combining policy and financial intelligence with proprietary tools for the analysis of credit risk, and assisting their clients to manage and mitigate risk in today's uncertain global carbon markets.