Carbon Credit Trade Case Study

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Register to read the introduction… Investor interest in the emerging global carbon credit market has created apt conditions for risk management products, ranging from insurance to derivatives. There is a growing recognition of carbon as a commodity that can be traded in spot market, and in the form of other complex financial products, such as derivatives and exchange-traded funds. Currently the carbon credit trade in Asia is dominated by China and India with carbon emissions trading showing the potential to become the world’s leading derivatives product as companies in Asia and the US seek to lower their greenhouse gas …show more content…
The protocol includes mechanisms which allow developed economies to meet their greenhouse gas emission limitation by purchasing GHG emission reductions from elsewhere. These can be bought from financial exchanges, from projects which reduce emissions in developing economies, like China and India, under the Clean Development Mechanism (CDM). CDM Executive Board accredits Certified Emission Reductions (CER) which can be bought and sold in this …show more content…
There is no local demand in the region except from Japan, which remains the major buyer of CERs in Asia to meet its Kyoto obligations. Other Asian countries still do not require companies to reduce emissions. An exchange requires liquidity for which a healthy match of demand and supply is necessary. • Chinese Surge: China is getting surging ahead of India as far as trading in carbon credits is concerned. China which accounts for 46% of current clean development mechanism (CDM) projects, against 36% for India is a major competitor. Given China’s capacity to implement projects on massive scale, it threatens to eat up massive share in this market. According to analysts, by 2012 the CER market in Asia is expected to be dominated by Chinese firms with a 66% share and India with just

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