India's greening industries lead in world carbon credit game

Dec 1, 2007, 12:24 GMT

New Delhi - Two years after the Kyoto Protocol entered into force in 2005, India has emerged as the most active seller of carbon credits worldwide, with many of the country's firms implementing eco- friendly systems of production and going 'green.'

Kyoto, an international agreement that for the first time regulates carbon dioxide emissions of industrial nations, provided for a so-called Clean Development Mechanism (CDM) that allows companies which reduce greenhouse gasses to sell their achievement for carbon credits.

The credits - called CERs for Carbon Emission Reduction - can be bought by companies in industrialized countries which must reduce their emissions under the protocol.

World governments are heading to Bali, Indonesia, in December to discuss what happens after Kyoto expires in 2012. The carbon credit scheme aims to hasten the reduction in greenhouse gas emissions that trap heat under the Earth's atmosphere, and developing countries like India and China that are exempted from the treaty have still seen a rush to invest in cleaner technologies.

Biogas effluents or wind-energy are being chosen over traditional electricity by a rapidly growing number of companies which have also found savings in their power bills.

According to Environment Secretary Meena Gupta, India accounts for 289 CDM projects out of the 844 registered - or 34 per cent - making it a global market leader. China and Brazil follow with 16 and 13 per cent respectively.

'A number of companies have started taking advantage of such opportunities as they are queuing up in the carbon market,' said Rahul Rai, who manages the renewable energy and carbon credit programme at Rabo India Finance.

Projects are mostly in the areas of renewable energy, followed by energy efficiency, industrial processes and municipal solid-waste. Substantial carbon credits are also coming from the infrastructure and power sectors which are thriving in India's fast-growing economy.

The carbon trading market tripled to 30 billion dollars in 2006, the World Bank said recently, making India well positioned to play a leading role.

Take India's cement industry. It generates 5 per cent of India's total carbon dioxide emission of about 150 million tons every year, but is now eyeing carbon credits in a big way. A study carried out by ACC, India's leading cement maker, says India accounts for 44 out of 76 total CDM cement projects worldwide and would deliver roughly 40 per cent of emission reductions in the sector.

In all, India's National CDM Authority has accorded approval to 800 projects, facilitating investment of more than 16 billion dollars in such projects.

'While 300 such projects are still to be cleared by the CDM Executive board, India has generated 29 million carbon credits and would have about 400 million CERs by 2012 allowing firms to earn 6 billion dollars by then,' said Vivek Kumar, a research associate with the Energy Resources Institute (TERI), a New Delhi-based environmental think-tank.

However, in terms of volumes, projections say that by 2012, China will lead the Asian market with 45 per cent of the supply market and India will drop to 16 per cent. Chinese projects are on a much larger scale than India's programmes.

Nonetheless, even India's large government-run companies, which were apprehensive about the Kyoto Protocol, are entering the fray.

The Delhi Metro Rail Corporation has started applying for credits for pushing a shift from buses and cars to trains. The Indian Railways, which runs the most extensive rail network in the world, also wants to get into the game with a new generation of trains run on clean fuel and solar power for lighting.

India's largest steel-maker, Steel Authority of India Limited, is applying for 70 projects and hiring consultants.

'We are not looking at incomes but cleaner processes and energy and technological efficiencies,' said Dr V Shastri, chief of the environment division at SAIL.

Measures like reforestation could also help reduce poverty in rural areas, according to studies cited in local media that show that villagers in central India's Handia forest reserve could earn 300,000 dollars a year from carbon payments by restoring 24,700 acres of degraded forests.

Already, forecasts of a severe winter in Europe has companies in India rubbing their hands at the prospect of new business worth millions of dollars from increased fossil-fuel use in the colder climate.