GANDHINAGAR, OCTOBER 24 : Two Indian companies, one from Gujarat and the other from Haryana, both in the business of refrigerants, are leaders in the world of carbon trading that goes under the Clean Development Mechanism (CDM) of United Nations Convention on Climate Change (UNFCCC).
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In fact, Vadodara-based Gujarat Fluorochemicals Ltd (GFL), and Gurgaon-based SRF are likely to see their bottomlines grow more by selling carbon credits, a waste product, than their main business, refrigerants.
Declaring financial results today, SRF CMD Arun Bharat Ram said in the last quarter, the company made Rs 149 crore from the transfer of Certified Emission Receipts (CERs, also called carbon credits); its net profit stood at Rs 89 crore. One CER represents the non-emission or sequestration of one tonne of carbon dioxide equivalent from the atmosphere.
As for GFL, against a post-tax profit of around Rs 130 crore in the last 12 months from its CFC business, executive director Deepak Asher claims a potential of upto
Rs 400 crore per annum if “we are able to sell all of our 6 million CERs.” So far, GFL has received around Rs 350 crore (including advances) toward sale of carbon credits, Asher said.
His was the first Indian company to get registered for a CDM project in March 2005 for 3 million CERs. With 114 CDM-registered projects, India is currently the world leader.
Meanwhile, SRF which got registered for its 3.83 million CERs in December the same year, has taken the lead in actual trading accounting for 39 per cent of market share in the country.
Experts say that though subject to wide fluctuations the going rate of one CER unit in the European market is around 12-13 Euros. “Against a peak of 22 Euros in April this year, it went down, below 7 Euros, before bouncing back to this level,” said Sudipta Das, partner (risk and business solutions), Ernst and Young.
Of the total CERs issued by the CDM executive board till date, SRF and GFL have close to 40 per cent between them. India alone has 59 per cent of the world total.
Though this lead is very temporary as its only a matter of time before large CDM projects from China and Brazil overtake those of India, it is a reflection of the preparedness Indian enterprises have shown in exploiting a new opportunity.
In 2002, after India became a signatory to the enabling Kyoto Protocol that provides for CDM in 2002, the companies prepared a project to incinerate the greenhouse by-product. This involved importing a closely-held technology in the developed world, called thermal oxidation of HFC23, that destroys the pollutant in an incinerator.
Following approvals by Ministry of Environment and Forests, the ‘Designated National Authority’ (DNA), the projects were submitted to the UNFCCC. The two could begin trading only after the CDM executive board registered them, and issued the CERs. Both GFL and SRF manufacture refrigerant HCFC22 that releases HFC23, a potential green house gas as by-product in the air.
The reason why HFC projects have higher CERs as compared to others is their extremely high global warming potential. Each 100 tonnes of HFC pollution is equivalent of 1.2 million tonnes of carbon dioxide emissions. For this reason, when China gets some of its HFC projects with more than 10 million CERs per annum capacity registered, Indian projects like GFL would get dwarfed by a wide margin.
While GFL is in talks with clients like Sumitomo Corporation (Japan), Rabobank Nederlands and Noble Carbon Credits Ltd (Netherlands), SRF chief executive Salotra says that with limited players in the buyers market, it takes a lot of effort to convince them of the credibility of a project.
What is carbon trading?
• Under Kyoto protocol, developed countries agreed that if their industries can’t reduce carbon emissions in their own countries, they will pay others like India (a signatory to the Protocol) to do it for them and help them meet their promised reduction quotas in the interest of worldwide reduction of greenhouse gases.
• The “currency” for this trade is called Carbon Emission Reduction (CER). One unit of CER is one tonne equivalent of carbon dioxide emission.
• UN Framework Convention on Climate Change registers the project, allowing the company to offer CERs produced by the project to a prospective buyer.
