You are here: Home » Markets » Commodities » Other Commodities
Business Standard

Media rap to hit carbon credits

Newswire18  |  Mumbai 

could harm the existence of the clean development mechanism (CDM) scheme of the Kyoto Protocol, especially as countries are gearing up to frame a successor to the protocol that expires in 2012, an industry official said.
A report in The Financial Times daily, published from London, had recently said some companies were earning big profits from carbon trading by spending very less. In some cases, these companies register projects for which clean-ups would have been made anyway.
"A public backlash against the CDM could jeopardise its very existence at a time when the future of climate policy looks increasingly bright as shown by the G-8 summit," said Pamposh Bhat, director, climate change, GTZ CDM-India, reacting to the criticisms.
GTZ CDM-India is a bilateral programme of Germany and India, implemented through the Bureau of Energy Efficiency of India and German Technical Corp.
The agency has tied up with Central Electricity Authority, National CDM Authority, Union and state governments, and public and private companies to develop a carbon market in India. Developed countries are bound by the Kyoto Protocol to cut greenhouse gas emissions between 2008 and 2012 by at least 5 per cent of the 1990 level.
One way to cut emission is buying certified emission reductions, CERs or carbon credits, which are generated by clean development mechanism projects that reduce greenhouse gas emissions.
However, industry experts justify the lapses in the market saying that since the carbon market is in a nascent stage, such incidences are bound to happen as more companies try to cash in on the potential.
"The Executive Board's (UN) rejection recently of cement blending projects because of not fulfilling the additionality criteria is a step in the right direction," said Bhat, highlighting that the UN has recognised the need to tighten the norms for registration of projects.
Additionality means a carbon dioxide reduction project would not have occurred had it not been concerned about greenhouse gas emissions, for mitigation of which it uses specific technology. It also means that the project is not into business as other projects in general.
Efforts are on by various countries to develop the carbon market further.
"The G-8 summit declaration calls for an improved and strengthened CDM and the future of the climate policy looks increasingly bright," said Bhat.
According to Bhat, Indian carbon market is one of the biggest globally and the Designated National Authority has approved over 630 projects, which have potential to generate approximately 400 million carbon credits till 2012.
"Total potential in terms of revenue expected is around Euro 3 billion (Rs 17,200 crore) till 2012, assuming one credit at Euro 10 (Rs 574)," she said.
Till date, over 200 projects from India have registered with the UN carbon market regulator and majority of them are small-scale and renewable energy projects.
"The bigger volume projects sectors such as MSW (municipal solid waste), waste water, SF6 (sulphur hexafluoride), and PFC (perfluoro carbon) destruction, are yet to be tapped," she said.
Also, with exchanges such as MCX planning to start carbon credit trading in India, Bhat feels there is vast scope for the carbon credit market.
"In principle, with MCX's background and track record in commodities trading, it is very much feasible for them to trade carbon credits and this will open a carbon trading market in India," she said.
In India, commodity exchanges at present cannot trade in indices, but only in goods that can be actually delivered, and direct foreign participation in buying or selling of commodities is not permitted under the Forward Contracts (Regulation) Act.
Hence, to develop a carbon market in India soon, the act needs to be amended in the monsoon session of Parliament starting in August.
A carbon credit generated by an Indian project is seen fetching around Euro 13-16 (Rs 716-881) or 65-70 per cent of European Union allowance price for 2008 delivery of credits issued by the UN body, said Bhat.

First Published: Fri, July 06 2007. 00:00 IST