Financing clean air

It requires more than the instincts of a trader or the vision of an economist to find the value proposition where none exists, especially when it comes to finding value in clean air or water. It requires altruism ...and a certain Richard Sandor to do that.

Sandor is the man who first came up with the idea of financing clean air before the Kyoto Protocol and later set up the Chicago Climate Exchange (CCX) to trade in clean air.

This despite the fact that his President had refused to have anything to do with the Kyoto Protocol and its requirement to put a cap on carbon emissions, and despite there being no compulsion on American companies to cap their emissions of greenhouse gases.

Sandor, who is also known as the pioneer of financial futures, got 225 top US companies to volunteer to put a ceiling on their carbon emissions and to buy clean air units when they failed to meet targets. Among his clients selling units of clean air are 20,000 families in faraway Kerala, spread over 600 villages in seven districts.

These are the families who had set up biogas plants in 2003 and are being knit together for the American cap and trade programme by an NGO, Andhyodaya, which has been devoted to promoting biogas plants and other means of non-conventional energy in Kerala since 1990.

Sandor, who was in India recently to meet his new-found partners, said he was targeting more such projects in the rural areas of the country to link them as catalysts for environmental change.

Peter Thettayil, who heads Andhyodaya, says the people who set up biogas plants never had commercial gains in mind. It was merely an enlightened way to conserve energy for them and make the most of available resources, cow dung in this case.

It makes good economic sense when setting up a plant costs Rs 13,000, while the returns are in the form of reduced LPG and electricity bills.

The returns from selling the carbon displacement credits derived from a biogas plant to CCX is a small amount. The exchange pays $4.20 per tonne of carbon displaced. A single biogas plant is expected to displace .010056 tonnes, according to Sandor. "We are bundling up several plants to achieve a tonne of displacement. And you need 5,000 plants for a tonne," adds Thettayil.

And how much does a household get? About Rs 800 a year. But that does not deter Thettayil. He is already organising meetings in his NGO's five centres across the state and with biogas plant owners at the block level.

The exchange has been criticised in the US and the EU for being full of leakages, not the least for offering too little money to incentivise energy conservation.

But Sandor is impatient with sceptics and is already seeing money in another wasted resource "" water. Trading in water conservation is not far away, he says.

Meanwhile, CCX has set up an office in Delhi to scout for more sellers of clean air in the Indian countryside. Call it exploitation, globalisation or just a breath of cleaner air.