Financial Daily from THE HINDU group of publications
Wednesday, Oct 16, 2002
Corporate - Environment
Cut down on greenhouse gases, earn greenbacks
S. Gopikrishna Warrier
CHENNAI, Oct. 15
INDIAN companies have started out on the path of making millions of dollars by reducing greenhouse gas emissions and selling the emission reductions as credits to developed country institutions and companies.
The first signs of carbon dollars materialising in the near future have emerged with six Indian companies being shortlisted as part of the Certified Emissions Reductions Procurement Tender (CERUPT) issued by the Dutch organisation, Senter International, under orders from the Ministry of Environment, Government of the Netherlands.
Experts say that while this marks the beginning, there is a far greater potential that the Indian industry can tap by trading greenhouse gas emission reductions under the Clean Development Mechanism (CDM) of the Climate Change Convention.
According to the list published by the Indian Ministry of Environment and Forests (MoEF), the companies shortlisted are: Ind-Bharat Energies, KalpaTaru Energy Venture, Vestas RRB (two projects), Suzlon Energy and Enercon India.
All the projects shortlisted are in the renewable energy sector.
Ind-Bharat Energies and KalpaTaru have submitted projects for 7.5-MW biomass-based power plants, in Maharashtra and Rajasthan respectively. Vestas RRB submitted one proposal for 15 MW power from wind-biomass project and another proposal for 14.45-MW wind power (from advanced 850 kW wind turbines) project. Both projects are proposed in Tamil Nadu.
The other wind energy proposal is from Suzlon, which would generate 15 MW of wind power from one MW wind turbines, at Sankaneri in Tamil Nadu. The last project selected is a proposal for 15-MW grid-connected renewable electricity supply project to be established at Nipani, Karnataka, by Enercon India.
According to Dr P. Ram Babu of PricewaterhouseCoopers Ltd (PwC), these companies have been given a nominal amount from CERUPT to start the validation process and then take the process forward. The cash flow can start once the agreement is finalised.
Dr Babu, who leads PwC's Sustainability Solutions Group in the country, said that there was much optimism about Indian companies raking in millions of dollars through carbon trading. While the six shortlisted could get around Rs 50 crore for their carbon traded, PWC estimates a market of $400 million for Indian industry in the initial years of carbon trading itself.
When some of the proposals for energy conservation in steel plants would materialise, the potential would be for trading millions of tonnes of carbon from India, he added.
Though Kyoto Protocol lists six greenhouse gases - carbon dioxide, methane, nitrous oxide, hydrofluorocarbons, perfluorocarbons and sulphur hexaflouride - the unit for transactions will be tonne carbon dioxide equivalents (tCO2e).
According to Dr Babu, for the CERUPT process a higher price per tCO2e for the Indian wind energy projects for the carbon saved was expected than the global average of 4.7 Euro stated by the Dutch agency handling the tender. PwC had provided consultancy for three of the companies shortlisted in the process.
While the negotiations on the price are expected to start in November, the fact that the six companies have started with the process of carbon trading is significant since the Indian Government will be hosting the Eighth Conference of Parties (CoP-8) at New Delhi between October 23 and November 1. India ratified the Kyoto Protocol on August 26 this year.
This is a prerequisite before Indian companies can start participating in carbon trading under CDM.
The CDM process goes through the stages of project identification, host country endorsement, development of baseline emission data, validation by an independent agency (Designated Operating Entity), registration with the Executive Board for CDM, independent monitoring of the actual emission reductions and verification.
The end of the process is the certification of emission reductions, which can then be traded. However, according to Dr Babu, the cash flow for carbon trading can start once the prices are negotiated.
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