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Indian Energy Exchange unit looks to start trades under VCM in 2023


In talks with registries, issuers

Separate from compliance market

200 mil credits seen from India by 2030

  • Author
  • Ruchira Singh
  • Editor
  • Bill Montgomery
  • Commodity
  • Coal Electric Power Energy Transition

The Indian Energy Exchange is looking to start trading carbon credits under the voluntary carbon market by the end of this year, to tap opportunities in the growing carbon credits business, Chairman and Managing Director S.N. Goel said June 1.

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The IEX launched the International Carbon Exchange, a wholly owned subsidiary, in December 2022 to offer a platform for the growing supply of carbon credits and upcoming demand for emissions reduction.

"The opportunity is now, so there is no point in delaying it by a few years," Goel said at a press briefing. The start of trade is going to be "either this calendar year itself, or if we find there is no big opportunity, then maybe we would have to defer it."

The exchange would be open to Indian carbon credits registered on Verra, Gold Standard and other registries, but it would also explore whether credits issued for projects in other countries can participate on the exchange.

"We are sure that the buyers who are there in the European countries and Australia, if they are able to get quality credits from India, there would be opportunities in this area," Goel said.

India may sell 200 million carbon credits by 2030, and demand from Indian companies would be to the tune of 120 million-130 million carbon credits by that year, said Rohit Bajaj, senior vice president and head-business development, strategy and regulatory affairs at IEX.

In pursuit of transparency

Goel and Bajaj said while most of the trades in the VCM are done via bilateral deals with few exchanges around the world for it, it may change as the market matures and participants seek transparency.

"Today most of the transactions are being done in the bilateral mode and none of these intermediaries would like that volume to go on the exchange platform, so we have to create values for the participants, bring that awareness, bring the transparency in the market, and hopefully we will be able to get a good market share out of that," Goel said.

According to Bajaj, ICX may be the fifth exchange in the world to trade carbon credits in the VCM.

To be sure, the Indian government may still have to issue clarifications about the distinction of credits for the VCM and compliance market, which may come in the months ahead, Bajaj said.

India is among the top three carbon credit issuers in the world.

Credit issuances were recorded from 27 nations in September 2022, the top three of which were India, the US and China, which issued 4.5 million, 3.6 million and 3.1 million credits, respectively, according to S&P Global analytics data.

Platts, part of S&P Global Commodity Insights, assessed CNC reflecting the most competitive nature-based carbon credits that avoid or remove GHG emissions at $1.05/mtCO2e May 31, down 36% from a month ago.

Compliance market waits

Meanwhile, IEX will be the platform for the carbon credits in the compliance market, the two executives said.

When the Indian Power Ministry's Bureau of Energy Efficiency, which is drafting the carbon market policy, announced its timeline with trades in the compliance market seen in 2025-26, IEX decided to move ahead with its plans for VCM, Goel said.

This mandatory market is expected to be much bigger than the VCM and IEX itself is going to be a participant, he added.

"They will probably merge Energy Saving Certificates or a part of it" with carbon credits, Bajaj said.

Renewable Energy Certificates will be separate for now until the renewable purchase obligations timelines expire, making them eligible to be merged into carbon credits later, he added.

According to the draft rules of the National Carbon Market issued by BEE, the current EScerts and RECs, which are quasi carbon credits, will transform into carbon credit certificates.

Internationally, it is expected by 2030 carbon credit prices will increase on the back of compliance requirements by more and more countries, Bajaj said.

Separately, exchange for coal and renewable hydrogen are the other upcoming business opportunities for IEX, Bajaj added.