India Inc takes to carbon trading

112 firms, including HLL, Tata Steel, to start trade in '07.

More than 112 Indian companies, including Hindustan Lever Ltd and Tata Steel, are set to trade in carbon credits.

These companies are ready with clean technologies to bring down the emission levels of greenhouse gases and sell certified emission reductions (CERs) to developed countries.

This is the largest portfolio for any country signatory to the United Nations Framework of Climate Change Convention (UNFCCC). The UN body certifies countries and companies that can trade in carbon credits under the Kyoto Protocol.

According to World Bank estimates, India is expected to rake in $100 million annually by trading in carbon credits and Indian companies are expected to corner at least 10 per cent of the global market in the initial years.

Globally, greenhouse gas emissions are expected to come down by 2.5 billion tonnes by 2012. According to industry estimates, Indian companies are expected to generate at least $8.5 billion at the going rate of $10 per tonne of CER.

By 2007, when actual trading will start, the cost of a tonne of CER was estimated to rise to $45, said officials in the ministry of environment and forests.

Under the Kyoto Protocol, between 2008 and 2012, developed countries have to reduce emissions of greenhouse gases to an average of 5.2 per cent below the 1990 level. They can also buy CERs from developing countries, which do not have any reduction obligations, in case their industries are not in a position to lower the emission levels themselves.

One tonne of carbon dioxide reduced through the Clean Development Mechanism (CDM) project, when certified by a designated entity, becomes a tradable CER.

"It is cheaper for developing countries to reduce emissions than developed countries. As a result, buyers are coming to Indian shores," said Teri Associate Fellow Vivek Kumar. Brazil and China are emerging two of India's strong competitors.

According to industry estimates, some Indian companies have entered into forward contracts with buyers from the European Union. These contracts are estimated at $325 million.

The World Bank has also purchased CERs from 10 companies. Tata Steel, HLL, Jindal Vijaynagar Steel, Essar Power and Gujarat Flurochemicals Ltd have specially designed projects to take advantage of the opportunity. Bharat Heavy Electricals Ltd is the only public sector firm which is planning to approach the ministry for approval.

The projects range from cement, steel, biomass power, bagasse co-generation and municipal solid waste to energy, municipal water pumping and natural gas power.

While the ministry has given the host-country clearance, the CDM projects will have to be approved by the executive board of the UNFCCC. Of the 15 projects approved by the UNFCCC so far, four are Indian.

These four are: Gujarat Flurochemicals, Kalpataru Power Transmission Ltd, the Clarion power project in Rajasthan and the Dehar power project in Himachal Pradesh.

India is the world's sixth largest emitter of carbon dioxide with its present share in global emissions estimated at 6 per cent.

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Going green

INDIA is expected to rake in $100 million annually by trading in carbon credits

INDIAN FIRMS are expected to corner 10% of the global market in the initial years

THEY ARE likely to generate $8.5 bn at the going rate of $10/tonne of certified emission reductions