Financial Daily from THE HINDU group of publications
Wednesday, Aug 17, 2005
Corporate - Environment
Run-up to Montreat meet on climate change Indian cos set to get better deal on carbon trading
New Delhi , Aug. 16
INDIAN companies eyeing for carbon trading benefits may get a good deal now with prices increasing in the run up to the United Nations Framework Convention on Climate Change (UNFCCC) Montreal conference in November-December.
Rates per tonne of Certified Emission Reduction (CER) that Indian companies can bargain are shooting up than the present Euro eight levels since at the Montreal conference the developed countries are expected to report what they have done domestically to bring down the emission levels, say experts. However, the rates would continue to hover at much lower levels than those prevalent in the European Union. Each CER stands for one tonne of carbon dioxide reduced and can be traded on global exchanges.
Signs of increasing rates are evident from a recent deal between the German Government and an Indian firm wherein the project has been "agreed upon" at a rate of Euro 14 per CER, claimed a reliable source declining to divulge any further details. The source added that the project is at the documentation stage as on date. Echoes another industry source, "The per tonne CER rates now range from Euro 8 to Euro 15 for various projects."
"During November 28 to December 9 this year in Montreal, industrialised countries have to report what they have done in their respective countries to achieve their emission reduction targets," said Mr Kalipada Chatterjee, Senior Adviser, Winrock International, adding that the CER rates are expected to appreciate. He, however, said that rates are unlikely to touch high levels of Euro 23 as prevalent in the European Union.
"In developed countries, reducing a tonne of CER is estimated to cost around $230 as compared with $6 in developing countries. The high reduction costs demand a high price," he said.
In EU, rates per tonne of carbon dioxide equivalent reduction are trading at Euro 22.47 (August 12) having touched Euro 29 levels about a month ago.
"We are now seeing an increased level of interest from developed countries in clean development mechanism (CDM) projects. There are much more queries from buyers nowadays. This could, to some extent, be explained by the forthcoming Montreal session," according to Ms Naman Gupta, Environment Specialist, CDM, GTZ (German Technical Corporation). She also said that Indian companies are now getting much higher rates than what was prevalent till about a few months ago.
Meanwhile at the UNFCCC, the Hyderabad based-Clarion Power Corporation Ltd has received clearance a few days ago for a 12-MW (Gross) renewable sources biomass project that would generate 26,300 tonnes of CERs per annum. Also "registered" at the UNFCCC is a 5-MW Dehar Grid Project at Himachal Pradesh by Astha Projects. Registration is the formal acceptance by the CDM Executive Board of a validated project as a CDM project activity. It is the prerequisite for the verification, certification and issuance of CERs related to that project activity.
The National CDM Authority, Ministry of Environment, has approved 91 projects that can seek investments under the CDM. However, these projects need to get the UNFCCC clearance to trade their CERs. The projects are from companies that operate in cement, iron and steel, generating power from biomass, hydro and wind energy projects.
The UNFCCC designed CDMs to achieve cost-effective green house gas (GHG) mitigation for industrialised countries. The Kyoto Protocol, that came into force on February 16, 2005, makes it obligatory for 37 developed countries to reduce their emissions of six harmful GHGs, including carbon dioxide. They can do this through a combination of direct domestic action and by investing in developing countries that reduce these emission levels.
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