Indian companies cashing in on $100 Bn market for carbon trading
Tuesday, 27 November 2007, 05:46 Hrs
New Delhi: With renewed global concern over climate change, carbon trading is emerging as a major business prospect for India Inc, which is eyeing a $100-billion annual potential in this area, says a World Bank expert. Under the Kyoto Protocol, when a company adopts a cleaner technology as compared to existing ones, the notional difference in emission levels becomes the carbon credit entitlement for that company, which can be traded in global markets. The buyers of this credit are companies from developed countries, which have to cut their emission levels as per the protocol. But they are permitted to offset the inability to cut emission levels themselves by buying carbon credits. "Sectors such as power, transport, cement and agriculture and providers of civic amenities like municipalities could significantly benefit from carbon trading," says Charles Cormier of the World Bank. "To capitalise on this booming carbon business, more and more Indian firms are setting up projects under the clean development mechanism," Cormier, the team leader for the bank's energy and environment programme in South Asia, told IANS. "The global business in carbon trading under the clean development mechanism (CDM) alone is currently valued at $5 billion a year," said the expert. "This can go up to $100 billion if the recommendations of the Intergovernmental Panel on Climate Change (IPCC) for a 50 percent reduction in carbon emission is implemented." According to statistics available with the United Nations Framework Convention on Climate Change (UNFCCC), out of 844 projects registered under the CDM scheme, as many as 289 are from India, accounting for 34.24 percent of the total. China ranks next with 131 projects, or 15.52 percent, followed by Brazil with 113, or 13.39 percent, Mexico with 97, or 11.49 percent and Chile with 21, or 2.49 percent. Some Indian companies that have certified emission reduction approvals from the UNFCCC are Reliance Industries, Tamil Nadu Newsprint, SRF, Bharat Forge, JCT, Philips Carbon Black, Oswal Woolen, Usha Martin and Tata Motors. India - the second largest in value of registered CDM projects - is a hot destination for buyers of credits because it offers a much cheaper option for them to meet their carbon emission targets, the World Bank expert said. Firms from developed countries like the US and Australia, which have not signed the Kyoto Protocol, are also getting sensitive about their "green" image due to pressures from investors and scrambling to cut emissions on a voluntary basis. "Buying carbon credits from CDM projects in developing countries like India is a commercially attractive proposition for these enterprises," Cormier said. He further explained that if a French company, for example, wanted to prune its emissions by switching over to a greener technology, it would have to spend $25 to $150 per tonne of carbon reduction. "This can be alternatively achieved by buying carbon credits from CDM projects in India for as low as $10 per tonne. This is attractive cost-economics that is driving the India carbon trading business." There is a large chunk of India's 1.17 billion population in villages that still does not have access to electricity and depends on non-clean energy sources like fuel wood, kerosene and diesel to meet their daily energy requirements. "If these villages are provided access to energy from clean sources like hydro, bio-mass and wind, they will be encouraged to move away from environment-harming fuels. This can give substantial carbon credits," Cormier said. "The cost of electrifying these villages can then be recovered by the developers of cleaner power projects through proceeds generated from sale of corresponding carbon credit entitlement."