MUMBAI: A month after IDEAcarbon launched the world's first carbon credit rating service in London, the firm plans to rate carbon credits generated from India's clean development mechanism (CDM) projects.

A rating system, said experts, would be useful to both buyers and sellers of carbon credits, considering that carbon assets not only face the risk of normal project delivery, financial and performance uncertainties, but are also subject to a high degree of regulatory and measurement risk.

Said Amul Gogna, managing director, The Carbon Rating Agency: ‘‘IDEAcarbon views the Indian market as one of the most important markets that will play a key role in shaping the carbon markets in future. In light
of that, IDEAcarbon has introduced ratings to key players in the Indian market and plans to escalate this in
near future.'' IDEAcarbon has, on its own, rated projects of JSW and Malavalli Power under the Carbon Rating Agency's ‘Market Initiated Ratings Initiative'.

IDEAcarbon, which is an independent provider of ratings, research and strategic advice on carbon finance, has recently been engaged by Multi Commodity Exchange of India (MCX) as its global strategic adviser on carbon markets.

Gogna said that IDEAcarbon's association with MCX will assist in bringing ratings to the Indian market. IDEAcarbon with the assistance of MCX, will create instruments that MCX will make available for trading on its platforms, and this will require rating of certified emission reductions (CERs) originated by Indian developers.

Since the carbon market in India is generating interest among investors across the board, credit rating would become an essential tool in the investment process.

A rating is an independent opinion on the likely performance of an emission reduction project based on the information provided to the rating agency. Market research has shown that buyers of carbon credits are particularly interested in an independent view on likely delivery risk — a rating.

Carbon ratings are expected to facilitate a disciplined and systematic development of the market that will lead to channelling of funds to more effective green projects. India has generated over 31 million CERs from registered projects which contribute around 14% to the average annual global total.