Brazil exchange sees first carbon credit auction in 2007

Brazil’s BM&F commodities and futures exchange plans to hold its first carbon credit auction later this year, an exchange official said.

“We are still in negotiations with the seller but we hope to come to an agreement in the second half of this year,” BM&F’s head of special projects, Guilherme Magalhaes Fagundes, said May 9.

Attending a carbon credits conference in Sao Paulo, Fagundes said most of the buyers interested in what will be an Internet auction were from Europe. He said he could not name the seller while negotiations were ongoing.

Brazil is No. 3 in the world, after China and India, in Clean Development Mechanism (CDM) projects, established under the Kyoto Protocol to reduce global warming. The United Nations-backed CDM program allows developed countries to invest in carbon emissions-reducing projects in developing countries and receive credit for the emissions reductions at home.

Such projects include hydroelectric dams, cogeneration plants, wind projects, and other schemes.

“There is still not sufficient liquidity in the world carbon credit market to have daily trading in the commodity, so we have taken the first step toward that in creating a transparent auction format that is geared toward attracting foreign buyers,” Fagundes said.

He said auctions would be held at the request of the participants. Until now, virtually all carbon credit sales from Brazil have occurred on a business-to-business level, either through the credit holder seeking out a buyer abroad or by a buyer soliciting a seller in Brazil.

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