SUBCONTINENT
Carbon Credit: Green India
Indian clean energy projects are estimated to receive a three-fold rise of carbon credits by December 2012, writes Siddharth Srivastava.
(Above): A wind power project in Chitradurga, Karnataka.
The number of carbon credits (CC) or certified emission reduction (CERs) certificates is set to grow three-fold in India over the next three years, due to increasingly successful claims with the UN by fast expanding renewable energy (RE) projects.
This has been stated in a report by leading research and credit rating firm CRISIL. Indian clean energy projects are estimated to receive 246 million CERs by December 2012, a three-fold rise from 72 million in November 2009.
The Clean Development Mechanism (CDM) enables developed nations to meet emission reduction levels by purchasing CERs issued under the UN Framework Convention on Climate Change to projects in developing nations that reduce greenhouse gases.
Each CER represents removal of one metric ton of carbon dioxide or its equivalent greenhouse gas from the atmosphere.
RE Driving Force. RE projects registering with the UFCCC will drive the issuance of CER volumes. According to Nagarajan Narasimhan, director, CRISIL Research, “We expect the government’s focus on RE power projects to drive this growth.”
According to CRISIL, a majority of CERs earned till now have been for hydro-fluoro-carbon reduction projects. As industry shifts to the use of non-HFC refrigerants, HFC related CERs issuance growth will drop perceptibly.
However, this will be compensated by the rise of RE power projects. CERs purely from registration of existing and new RE projects will increase to 76 million by December 2012 from 14 million in November 2009.
This would mean additional CERs worth Rs 40 billion (assuming 1 CER=10 euro). Benchmark CER futures were trading at about 13.35 euros in Europe on May 13.
(Above): Ministry of New and Renewable Energy secretary Deepak Gupta at the inauguration of 2 x 100 kWp Solar Photovoltaic Rooftop Power Generation Systems at Manesar May 20. [PRESS INFORMATION BUREAU]
CER Revenues. According to CRISIL, by December 2012, Indian companies could earn more than Rs 110 billion via sale of CC, with the RE sector accounting for a third of the revenues at Rs 40 billion.
This will cement India’s second position in the global CER market behind China. Apart from RE, the two sectors of big CER earnings for India are hydro-fluoro carbon and waste gas utilization.
Prominent Indian firms that have been encashing the carbon market include the Delhi Metro Corp, JSW Steel, State Bank of India, hospitality giant ITC, software giant Wipro, state owned oil and gas explorer ONGC and power trading giant PTC India.
Globally the carbon market is estimated at $125 billion at the end of 2008. New Delhi, however, has been concerned about global recession and low value of CER certificates. Earlier this year the Reserve Bank of India has allowed Indian companies to hedge c-credits on overseas exchanges.
Last year the government allowed futures trading on c-credits on Indian exchanges. Taking a cue from the European Union, India is also looking at a domestic emissions trading system.
India’s Clean Energy Quest. New Delhi has been aggressively pushing RE and set up a National Clean Energy Fund to extend financial help to promote energy efficiency, which will form the basis of higher CERs, as per CRISIL.
A coal tax has been imposed to finance the National Solar Mission to produce 20,000 MW of solar energy by 2022 which could lead to 18-20 percent reduction in emissions by 2020, according to expert estimates.
Overall, India’s wind energy potential has been estimated at 50 GW. About 6 GW is expected to be installed in the next two years. The country’s installed wind energy capacity is about 11 GW. India is looking to tap an estimated potential of about 15,000 MW of small hydropower projects.
Prior to the Copenhagen summit last year, India declared voluntary cuts in carbon intensity (CO2 released per unit of GDP), by 25 percent by 2020 from 2005 levels.
There is a long way to go. India’s capita emission of greenhouse gases is 1/20th of the U.S. It is, however among the top five polluters in the world in absolute terms, with U.S. and China the top two.
Need For Climate Pact. The CRISIL report is based on the assumption that there will be a post 2012 climate pact that would forward the Kyoto protocol that binds 40 rich nations to meet emission targets. There is a tussle in assigning responsibilities and finance.
Thus, leading CER generating countries such as India and China will be able to reap the benefits of carbon trade only if the uncertainty about emission reduction targets, possible imposition of carbon tax and non tariff barriers on imported goods by Western economies is removed.
Many clean energy projects in India are being launched keeping in mind medium to long term income generation from the c-credit market.
In what is considered the world’s biggest c-credit project approved by the UN under CDM, India is replacing 400 million incandescent light bulbs with energy saving CFL bulbs at subsidized prices preventing 40 million metric tons of carbon emissions annually. The financial viability of the project is based on income streams due to c-credits.
The immediacy of global warming cannot be denied. Last week an official assessment said that in a span of 16 years, India’s CC causing GHG emissions have increased by 58 percent , with the biggest contributor coal fired power sector.
India needs to improve energy efficiency, introduce new integrated public transport plans, devise a green building code and enhance deployment of solar energy, the report emphasized.
A consensus among nations needs to be worked out about emission cuts, even as there is a strong need to de-link economic growth and high intensity of energy use.
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Siddharth Srivastava is India correspondent for Siliconeer. He lives in New Delhi.
