G Seetharaman
Kyoto Protocol obligations of companies in the developed world augur well for India
MUMBAI: With restrictions on GHG emissions getting stricter in western nations, Indian companies involved in clean development mechanism (CDM) projects are laughing their way to the bank.
“The revenues Indian companies earn through carbon trade could increase from Rs 2,000 crore now to Rs 20,000 crore in 2012,” Sudhipta Das, partner, Ernst & Young Pvt Ltd said.
SRF, a Gurgaon-based chemical company, sells carbon-emission reduction (CERs) to 13 corporations, most from the developed world. Sanjay N Mathur, associate vice-president, international sales, SRF said, “Out of our last year’s turnover of Rs 1,800 crore, around Rs 450 crore came from our CDM project on HFC 23 (hydro-fluorocarbons) in Bhiwadi.”
Some of the other Indian companies engaged in CDM projects are Torrent Power (11 million credits), Gujarat Fluorocarbons (3.3 million credits), ONGC’s Hazira refinery (2 million credits), and Essar Power (0.5 million credits).
Robert Taylor, director, Agrinergy, a provider of carbon credit services, said, “China and India are the most significant and active CDM hosts.”
“Despite having more projects than China, India is not able to match its counterpart’s CER levels because of the larger scale of China’s projects,” added Taylor.
According to him, though India’s current share in the global carbon trading market is jus 15% in comparison to China’s 60%, it is expected to rise to 30-50% of the 700 million CERs by 2012.
Taking the India-China comparison further, Taylor added, “Though India started earlier, China has moved ahead with a reduction of 72.1 million tonnes of carbon dioxide (CO2) as per July 2007, compared to India’s 25.1 million tonnes.”
There has been increasing debate around the world over the Kyoto Protocol, which was mooted in 1997 and came into force in 2005.
India and China are not required to reduce carbon emissions under the current agreement. Since companies in the industrialised nations that have ratified the Kyoto Protocol have been set quotas for carbon emission, they normally turn to developing economies to buy CER credits once they cross their limit. A CER is a credit equivalent to one tonne of CO2 reduction under CDM.
Under CDM, a developed country can take up a greenhouse gas reduction project activity in a developing country and earn credits for meeting its emission reduction targets, while the host nation would receive the capital and clean technology to implement the project. Also, a host nation can set up a CDM project on its own with approval from the CDM executive board and sell the carbon credits to a developed nation. This augurs well for countries like India and China.
Considering the healthy revenue stream CDM projects provide, both Das and Mathur believe it could spawn a new industry.
