Carbon trading" or trading in credits for reducing carbon emissions, has entered India with a big bang but it has come with the usual scepticism that accompanies measures to improve the environment and attendant policy confusion.
It is estimated that India and China will be huge markets for carbon trading with a share of over 70 per cent of the global pie, according to P Ram Babu, head of the sustainable solutions division of PricewaterhousCooper.
The dominant status that India could enjoy is expected to be driven more by its large tractable land which can host plantations that absorb carbon emissions.
The Kyoto Protocol , formulated in 1997, confirms that ratifying nations agree to reduce their emissions of greenhouse gases by an average of 5.2 per cent of the carbon dioxide emission levels of 1990, during 2008 -12.
The six greenhouse gases that are to be controlled are carbon dioxide, methane, nitrous oxide, hydroflurocarbons, perflurocarbons and sulphur hexafluroride. The unit used for measuring emission reduction is tonnes of carbondioxide equivalent.
The US , the largest country on the emissions list accounting for 36.1 per cent of emissions, backed out of the Kyoto Protocol last year. Russia accounts for 17.4 per cent, Canada 3.3 per cent and Australia 2.1 per cent.
This protocol envisages carbon credit trade between countries with carbon sinks or huge planted forests and others that produce higher levels of pollution than they are allowed.
Trading in carbon credits is designed to allow firms that fail to meet emission standards to buy credits from firms that over fulfil their targets.
Trading can be conducted up to 2012, deadline to review levels and check emission commitments again.
Penalty for not meeting emission norms is $ 25 per tonne emitted extra. Currently carbon dioxide is trading at approximately $ 4 to $5 a tonne.
It is anticipated that as years go by and 2008 comes closer, the price of carbon would go up, peaking at 2012.
Clean Development Mechanism or CDM is one of the flexible mechanism developed through the Kyoto Protocol negotiations to reduce global green house gas emissions.
Only the developed countries have a mandate to reduce their emissions to 5 percent below their 1990 levels, developing countries have the opportunity to sell their carbon credits to companies from the developed countries.
The protocol gives credit for carbon dioxide equivalents reductions out of the atmosphere through activities like planting, preserving and extending forests. Participating countries are allowed to sell excess permits.
Developed countries can support programmes in developing countries through joint implementation and earn permits but this is still under negotiations and the regulations unclear.
The projects initiated by Indian companies after January 2000 in diverse areas such as energy efficiency, co-generation, natural gas, alternative auto fuels and hydel power make them eligible to sell their carbon credits.
Various funds are being set up including the first one in India by Infrastructure Development Finance Company (IDFC), funded by the World Bank
