Tuesday, March 5, 2013

Trading for a cleaner future

India stands 2nd in the global carbon trading regime under Kyoto Protocol, a spot which it ceded to China in 2006 and is pacing quite slowly to realize its full carbon reductions and energy efficiency potential

Post the declaration of the Copenhagen Accord, the face saving last minute attempt by heads of state of some of the world’s biggest carbon emitting nations to pave some way forward to “take note of” the nonbinding commitments by its signatories, the biggest backlash occurred from the EU with many members feeling snubbed and sidelined by USA and the BASIC (India, China, Brazil and South Africa) states. Then UK Prime Minister Gordon Brown accused a small number of nations holding the Copenhagen talks to ‘ransom’. Interestingly, Kyoto Protocol, the only legally binding emissions reductions treaty existing till date has its biggest signatories as the EU states while lead emitter US hasn’t even seen the long elusive Climate Change Bill even being tabled in its House or Senate. The most significant element of Kyoto, the Clean Development Mechanism lets non-Annex I states (mostly developing nations) get credit from Annex 1 states (industrialized nations mostly from EU) for investing in projects that produce carbon emission reductions (CERs), which can then be traded on exchange markets like those in EU, have a far greater potential of reducing emissions in countries like India. But the market is far from realizing its full potential in India and a domestic carbon trading scheme is not even been talked about. India currently stands at second place behind China in no. of CDM projects registered and the total CERs being generated The potential of India to have a flourishing carbon market can be gauged from the fact that the first project in India got registered under CDM in 2004 and till September 2010, the number of CDM projects in India had crossed 2350. According to a study by CRISIS Research, the number of CERs generated in India till November 2009 stood at 76 million (1 CER is equivalent to reducing 1 metric tonne of carbon dioxide or equivalent) while by December 2012, the total CERs generated will surpass 246 million. CRISIL study also claims that CER issuance in the renewable energy sector, from registration of existing and new renewable energy projects alone, will increase to 76 million by December 2012 from 14 million in November 2009 with the percentage of renewable energy projects in India’s total CDM tally rising to 31% by December ‘12 from 19% in November ‘09. The total potential of revenues from carbon trading for India has been attributed to be about 10% of the global carbon market which stood at over $144 billion in 2009.

However, the ‘honourable’ 2nd rank (India was 1st till 2006) in CDM projects registered is little more than one third that in China which accounts for almost half of all CDM projects globally while also boasting of around 2/3rds of the total CERs issued globally. Though India has less than a third of China’s total carbon emissions and around one fourth of total per capita emissions, it is also true that India needs much greater investment in the long term in energy and infrastructure to uplift its hundreds of millions out of poverty (which China has almost achieved). This entails greater dependency on carbon intensive technologies unless the emissions reductions market is not developed to its full potential soon here.


Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).

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