Jessica Cheam, Straits Times 16 Nov 07;
Asia Carbon says it is in talks with SGX to allow trading of carbon credits on the spot
A LOCAL firm is working with the Singapore Exchange (SGX) to launch a potentially lucrative carbon credit trading facility.
Asia Carbon Group has said it is in 'close talks' with the SGX over the plan. A deal will propel Singapore to the forefront of carbon trading in the region, Asia Carbon's group director, Mr Yuvaraj Dinesh Babu, told The Straits Times.
When contacted, Mr Benjamin Foo, head of the SGX's clearing and commodities business, told The Straits Times carbon trading was an 'important area', given higher awareness of environment issues.
'We are studying the market for carbon trading in Asia and are talking to the industry,' he said.
Singapore has set its sights on becoming a regional carbon trading hub ever since the Republic ratified the Kyoto Protocol in March last year.
Both IE Singapore and the Economic Development Board have backed the plan.
The Kyoto treaty is a global agreement among industrialised nations to meet greenhouse gas emission targets. It included a scheme - the Clean Development Mechanism (CDM) - that created a market for carbon credits when it came into effect in 2005.
Carbon trading, also known as emissions trading, is the buying and selling of these credits. Most scientists have largely blamed greenhouse gas emissions for global climate change.
The global carbon market trebled in size to US$30 billion (S$43.4 billion) between 2005 and last year, so it was not surprising that Singapore wanted a piece of this growing multibillion-dollar pie. The International Emissions Trading Association said the market could be worth US$60 billion this year.
Currently, 80 per cent of carbon credits are traded bilaterally - directly between sellers, usually from Asian countries, and buyers in Europe and Japan. Twenty per cent of these, however, are traded on about 10 carbon exchanges worldwide.
Asia Carbon's ACX-Change electronic platform, launched in 2003 to hold auctions of carbon credits, is one of them. Asia Carbon now wants to take carbon trading a step further by introducing spot trading on the SGX, said Mr Dinesh.
Spot trading means carbon credits can be traded on the spot.
'We believe the SGX has the clearing and settlement infrastructure for such trading and, eventually, we want Singapore to be the consolidated trading centre for all buyers and sellers in the region,' said Mr Dinesh.
He spoke at a climate change conference on the third day of the Global Entrepolis @ Singapore on Wednesday.
Founded in 2003, Asia Carbon has developed about 100 projects in Asia that will generate about 23 million carbon credits until 2012. These credits will be worth about 276 million euros (S$584.5 million) upon delivery.
Asia Carbon's next step is to create different carbon financial instruments, such as futures and options, for the carbon market, Mr Dinesh said.
'Some companies are withholding their credits to sell in the future, so there's a need for us to address this,' he said.
At the same conference, World Bank senior adviser Clive Mason said the carbon market was 'likely to stay post-2012'. The Kyoto Protocol expires that year.
Recently, concerns have emerged of a slowdown in the carbon market. London-listed carbon credit developer EcoSecurities has lowered its carbon credit portfolio projections, causing its share price to slump 47 per cent last Tuesday.
This is not surprising, according to Mr Mason, as it becomes less viable for CDM projects to be registered coming up to 2012. Registration takes 18 months.
