INDIA AND CARBON CREDITS

ANALYZING INDIAN SCENARIO

India being a developing country has no emission targets to be followed. However, she can enter into CDM projects. As mentioned earlier, industries like cement, steel, power, textile, fertilizer etc emit green houses gases as an outcome of burning fossil fuels. Companies investing in Windmill, Bio-gas, Bio-diesel, and Co-generation are the ones that will generate Carbon Credits for selling to developed nations. Polluting industries, which are trying to reduce emissions and in turn earn carbon credits and make money include steel, power generation, cement, fertilizers, waste disposal units, plantation companies, sugar companies, chemical plants and municipal corporations.

DELHI METRO RAIL CORPORATION (DMRC):

A must mention project is The Delhi Metro Rail Corporation (DMRC): It has become the first rail project in the world to earn carbon credits because of using regenerative braking system in its rolling stock. DMRC has earned the carbon credits by using regenerative braking system in its trains that reduces 30% electricity consumption.
Whenever a train applies regenerative braking system, the released kinetic energy starts a machine known as converter-inverter that acts as an electricity generator, which supplies electrical energy back to the Over Head Electricity (OHE) lines. This regenerated electrical energy that is supplied back to the OHE that is used by other accelerating trains in the same service line. DMRC can now claim 400,000 CERs for a 10-year crediting period beginning December 2007 when the project was registered by the UNFCCC. This translates to Rs 1.2 crore per year for 10 years. India has the highest number of CDM projects registered and supplies the second highest number of Certified Emission Reduction units. Hence, India is already a strong supplier of Carbon Credits and can improve on it. (Refer Annexure No. 3 & 4 for projects registered and expected average annual CERs generated respectively)

BENEFITS FOR INDIA

By, switching to Clean Development Mechanism Projects, India has a lot to gain from Carbon Credits:

a) It will gain in terms of advanced technological improvements and related foreign investments.
b) It will contribute to the underlying theme of green house gas reduction by adopting alternative sources of energy
c) Indian companies can make profits by selling the CERs to the developed countries to meet their emission targets.

TRADING OF CERS:

• As a welcome scenario, India now has two Commodity exchanges trading in Carbon Credits. This means that Indian Companies can now get a better trading platform and price for CERs generated.
• Multi Commodity Exchange (MCX), India’s largest commodity exchange, has launched futures trading in carbon credits. The initiative makes it Asia's first-ever commodity exchange and among the select few along with the Chicago Climate Exchange (CCE) and the European Climate Exchange to offer trades in carbon credits. The Indian exchange also expects its tie-up with CCX which will enable Indian firms to get better prices for their carbon credits and better integrate the Indian market with the global markets to foster best practices in emissions trading.
• On 11th April 2008, National Commodity and Derivatives Exchange (NCDEX) also has started futures contract in Carbon Trading for delivery in December 2008.
• MCX is the futures exchange. People here are getting price signals for the carbon for the delivery in next five years. The exchange is only for Indians and Indian companies. Every year, in the month of December, the contract expires and at that time people who have bought or sold carbon will have to give or take delivery. They can fulfill the deal prior to December too, but most people will wait until December because that is the time to meet the norms in Europe. If the Indian buyer thinks that the current price is low for him he will wait before selling his credits. The Indian government has not fixed any norms nor has it made it compulsory to reduce carbon emissions to a certain level. So, people who are coming to buy from Indians who are actually financial investors. They are thinking that if the Europeans are unable to meet their target of reducing the emission levels by 2009, 2010 or 2012, then the demand for the carbon will increase and then they may make more money. So investors are willing to buy now to sell later. There is a huge requirement of carbon credits in Europe before 2012. Only those Indian companies that meet the UNFCCC norms and take up new technologies will be entitled to sell carbon credits. There are parameters set and detailed audit is done before you get the entitlement to sell the credit.

Financing upport in India:

• Carbon Credits projects requires huge capital investment. Realizing the importance of carbon credits in India,
• The World Bank has entered into an agreement with Infrastructure Development Finance Company (IDFC), wherein IDFC will handle carbon finance operations in the country for various carbon finance facilities.
• The agreement initially earmarks a $10-million aid in World Bank-managed carbon finance to IDFC-financed projects that meet all the required eligibility and due diligence standards.
• IDBI has set up a dedicated Carbon Credit desk, which provides all the services in the area of Clean Development Mechanism/Carbon Credit (CDM).
• In order to achieve this objective, IDBI has entered into formal arrangements with multi-lateral agencies and buyers of carbon credits like IFC, Washington, KfW, Germany and Sumitomo Corporation, Japan and reputed domestic technical experts like MITCON.
• HDFC Bank has signed an agreement with Cantor CO2E India Pvt Ltd and MITCON Consultancy Services Limited (MITCON) for providing carbon credit services. As part of the agreement, HDFC Bank will work with the two companies on awareness building, identifying and registering Clean Development Mechanism (CDM) and facilitating the buy or sell of carbon credits in the global market.


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