India Firms Eye $5 Billion from Carbon Credit in Seven Years
Date: 15-Sep-05
Country: INDIA
Author: Thomas Kutty Abraham
The credits, or Certified Emission Reductions (CERs), are products of the Kyoto Protocol, which aims to reduce carbon dioxide and other greenhouse gas emissions from 2008.
Greenhouse gases, seen by most scientists as a key contributor to global warming, mix uniformly in the atmosphere. As a result, emission cuts anywhere in the world can make a difference, and the market in CERs has been set up to provide a motive for any polluter to clean up its act.
Four of the 12 companies so far licensed to sell their emissions cuts are Indian, and almost 100 other Indian firms are part-way through the registration process.
Analysts say countries such as India and Brazil -- Kyoto Protocol signatories under no obligation to cut because their energy consumption is relatively low -- are already leading suppliers of CERs traded on forward contract basis.
"Indian companies currently supply more than 30 percent of the (traded) CERs. They could improve that share," said Ajay Mathur, president of carbon credit trader Senergy Global Pvt. Ltd. and a former head of the World Bank's Climate Change division.
Indian companies that have jumped in the fray, from steel and sugar firms to utilities, could generate 500-600 million CERs or nearly a quarter of a global traded total of 2.5 billion units by 2012, officials said.
"India has had a headstart and should retain the advantage until China gets going," Mathur said. China is also an exempt Kyoto signatory.
European Union companies are already in the market for CERs. They have to cut carbon dioxide emissions from this year to meet targets under an EU-specific scheme.
Companies can buy credits on the traded EU market, or from registered emissions-cutting projects outside the EU. The EU scheme covers only carbon dioxied emissions. The Kyoto credits will embrace five other greenhouse gases as well.
Oslo-based consultancy Point Carbon said the global market in carbon emissions could grow to $6 billion this year.
It estimates global carbon market transactions in the first half alone at 134.5 million tonnes of carbon dioxide, equivalent to about 1.62 billion euros ($2 billion).
Industry officials said CERs traded by Indian companies were fetching about $7 per unit, equivalent to one tonne of carbon dioxide.. Mathur said the prices were expected to stabilise at about $10 a unit.
"Carbon credit has opened a new horizon for Indian companies," said Deepak Asher, vice president, corporate finance at Gujarat Fluorochemicals Ltd.
The firm was registered for carbon trading by the United Nations Framework Convention on Climate Change (UNFCC) after it proposed to cut HFC 23, a greenhouse gas emitted while making refrigerant chlorofluorocarbons.
Gujarat Fluorochemicals hopes to generate 4-6 million carbon credits annually from early next year, and has a deal to sell them to the Netherlands and a Japanese firm. Its shares have soared 13 fold in slightly more than a year, to 1,982 rupees.
HOT DEALS
Tyre cord maker SRF Ltd. has signed a deal with a unit of Royal Dutch Shell Plc to sell the oil giant half a million CERs from a project it aims to commission by the end of 2005.
The value of SRF shares has multiplied by seven times to 314 rupees in just a year.
SRF hopes to generate about 3.8 million carbon credits a year by cutting HFC 23, said N. Rammohan, associate vice president.
Officials at India's National Clean Development Mechanism Authority said it had given host country approval -- the first step in securing UNFCC clearance -- for 94 proposals and would clear another 40 proposals soon.
Firms with this approval include Tata Steel Ltd., India's second-largest steel maker, JSW Steel Ltd., sugar producers Balrampur Chini Mills Ltd. and Dhampur Sugar Mills Ltd., and Indo Gulf Fertilisers Ltd. and Gujarat Ambuja Cements Ltd.
"The carbon credit market is still in a state of flux. But gains for Indian companies will