Monday, March 31, 2008

Energy Derivatives and Emission Trading must be effective and sustainable: says new CII report

by Jo Black

Energy Derivatives can provide a low cost energy alternatives and popularizing emission trading can go a long way in providing sustainable and effective energy solutions to a fast developing and energy starved economy like India, said H L Bajaj, Technical Member, Appellate Tribunal for Electricity, at a conference on Energy Derivatives and Emission Trading organized by the Confederation of Indian Industry (CII) along with the British High Commission in New Delhi this morning.

India’s energy needs are likely to increase six times over the next 20 years and there is an urgent need for energy derivatives, renewable and nuclear energy as well as a mitigating process, he said and added that draft report “Development of Energy Derivative Market in India” prepared by the CII with the support of the British High Commission, is very timely and will go a long way towards creating awareness about these issues.

He also cautioned that any future planning in the energy and emission sector must balance the environmental aspects with the issues of development, the long term impacts and short term targets, local issues and global aspects and even some ‘light-handed regulation’ in an increasingly privatizing energy market.

The energy market in India is already responding to the need to find energy derivatives and India is making great contributions already, said Daniel Shephard, First Secretary, Energy and Sustainable Development, British High Commission in New Delhi.

Globally, the United Kingdom’s commitment is to work towards broader, deeper carbon markets where India can make best use of the opportunities, he said and added that the deeper engagement between the UK and India is towards providing cheaper, low-Carbon energy alternatives.

The energy sector is vital for the economic reliability and growth of the country, said Mahendra Kumar, Chief Executive, Reliance Energy Trading Ltd. He appreciated the efforts of the CII and the British High Commission in bringing out this report.

The DEDMI report which is aimed at evolving a consensus among stakeholders on key issues on energy trading and derivatives market in order to enable organized development of energy markets in India, form a consensus among stakeholders and work with regulators, said V Raghuraman, Principal Advisor and Chief Coordinator - Energy, Environment and Natural Resources, CII.

The UK and India are committed to building a global low-Carbon economy and CII will work closely with the industry, various stakeholders as well as the regulators to ensure this, he said.

As part of the capacity building in India on energy trading and derivatives, the day-long conference centered around presentations on emission trading, electricity trading and derivatives, trading and derivatives in Hydrocarbons and included an Introductory Training Module on Energy Trading and Derivatives.

This report provides energy policymakers in India with information for their assessment of the merits of derivatives for managing risk in energy industries. It also indicates how market players can use derivatives as effective tools for risk management.

The report notes various developments taking place in India towards the advancement of energy markets in general and energy derivatives market in particular. It discusses several existing barriers that have been impeding further growth of energy markets in the country. Finally, the report proposes the way forward for the structured development of energy markets in India.

 

 

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