Exclusive: India to bolster carbon trading market with stabilisation fund
India is planning a stabilisation fund to keep prices of credits in its planned carbon market above a certain threshold, ensuring that they remain attractive for investors and that the market succeeds in cutting emissions, two government sources said.
Money in the fund would be used by a market regulator to buy carbon credits if prices fell too low, one of the officials said. Consistent investor interest in credits and a floor under the price would be needed because sharp falls in the market could discourage industries from reducing carbon dioxide emissions, that official added.
Details would be announced next year, said a third person, Samrat Sengupta, vice president for new businesses and market strategy at carbon offsetter EKI Energy Ltd, which has been briefed by the government. In creating a carbon market, a country sets a limit on emissions and then allocates a corresponding quantity of tradable permits, or credits, to emitters.
"The World Bank continues to remain committed to support India in developing a carbon trading market and other instruments to help scale up financing for key climate transitions," it said in an email to Reuters.
The Indian market would cover emissions of carbon dioxide and also five other greenhouse gases valued in terms of their carbon dioxide equivalence, the sources said.
In a part of the planned market to be called the compliance market, participation would be obligatory for entities in a dozen sectors, such as oil refining, steel, aluminium and cement, the sources said. India's carbon market is being set up in two phases, according to the government's presentation slides.