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NSE Ventures into Carbon Credit Market, Introducing Electricity Derivatives

NSE Explores Carbon Credit Trading, Launches Electricity Derivatives

National Stock Exchange Expands Product Range with Bond Index and Carbon Credit Derivatives

In a bid to diversify its offerings and transform into a multi-asset stock exchange, the world’s largest derivatives stock exchange is planning to introduce derivative contracts based on the indices of the corporate bond index and government bond index. However, the implementation of these contracts is subject to clearance from regulators.

Furthermore, the National Stock Exchange (NSE) is actively exploring opportunities in the electricity derivatives market and the voluntary carbon credit (VCC) market. Sriram Krishnan, the NSE Chief Business Development Officer, highlighted the potential of the VCC market in India, stating that there are currently only two markets for these credits. With approximately 26 million voluntary carbon credits available in India, valued at an estimated USD 150 million, there is a need to establish a market that can monetize and create a sustainable trading environment for these credits.

Krishnan emphasized the importance of building a robust market for VCCs, given India’s annual production of carbon credits. The NSE aims to play a pivotal role in developing a healthy market for these credits and exploring ways to quantify and unlock their value.

Additionally, Krishnan mentioned that the NSE is eagerly awaiting regulatory clearance to introduce derivative contracts based on corporate bonds and government bond indices. Once approved, these contracts would provide investors with new avenues for hedging and speculating on the performance of these bond markets.

The NSE is not the only exchange eyeing the potential of the VCC market. The Indian Energy Exchange (IEX) has also expressed its interest and established a wholly-owned subsidiary dedicated to exploring business opportunities in this sector.

At a governmental level, there are plans to establish the Indian Carbon Market (ICM), which aims to decarbonize the Indian economy by pricing greenhouse gas emissions through the trading of carbon credit certificates. The Bureau of Energy Efficiency, Ministry of Power, and the Ministry of Environment, Forest & Climate Change are actively developing the Carbon Credit Trading Scheme and engaging stakeholders in this endeavor.

Recognizing the economic benefits of decarbonization, a previous report by the Deloitte Economics Institute projected that India could gain a staggering USD 11 trillion in economic value over the next 50 years by taking a leadership role in limiting global temperature rise and promoting sustainable practices.

National Stock Exchange Expands Offerings with Bond and Carbon Credit Derivatives, Embracing Sustainable Markets

In a strategic move to diversify its portfolio and adapt to changing market dynamics, the world’s largest derivatives stock exchange has unveiled plans to introduce derivative contracts based on corporate bond indices and government bond indices. However, the implementation of these contracts is contingent upon regulatory clearance.

Simultaneously, the National Stock Exchange (NSE) is exploring opportunities in two burgeoning sectors: electricity derivatives and the voluntary carbon credit (VCC) market. Sriram Krishnan, the NSE Chief Business Development Officer, disclosed the immense potential of the VCC market in India, noting its nascent state with only two active markets. With a substantial reserve of approximately 26 million voluntary carbon credits, valued at an estimated USD 150 million, the challenge lies in establishing a robust market ecosystem to monetize and assign proper value to these credits.

Krishnan highlighted the need for creating a sustainable marketplace for VCCs, considering India’s annual production of carbon credits. The NSE aims to facilitate the growth of this market, providing avenues for monetization and paving the way for a thriving trading environment.

Additionally, Krishnan shared that the NSE eagerly awaits regulatory clearance to launch derivative contracts based on corporate bonds and government bond indices. Once approved, these contracts would offer investors new avenues for managing risks and speculating on the performance of these bond markets.

The NSE’s initiatives align with a broader trend in the Indian market, as the Indian Energy Exchange (IEX) has also established a subsidiary focused on exploring opportunities in the voluntary carbon market.

At the governmental level, there are plans to establish the Indian Carbon Market (ICM), which aims to facilitate the decarbonization of the Indian economy through the pricing of greenhouse gas emissions via carbon credit trading. The Carbon Credit Trading Scheme, developed by the Bureau of Energy Efficiency, Ministry of Power, and the Ministry of Environment, Forest & Climate Change, has already initiated stakeholder consultations.

Recognizing the significant economic benefits, a previous report by the Deloitte Economics Institute emphasized India’s potential to export decarbonization efforts and generate USD 11 trillion in economic value over the next 50 years by taking proactive measures to limit global temperature rise.

Through these initiatives, the NSE and other market participants are actively embracing sustainability and positioning themselves at the forefront of emerging markets, ensuring a greener and more diverse financial landscape.

Also read this article: Ambitious Growth Target: HDFC Bank MD Sets Aim to Double Every Four Years Following Merger


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