US climate Bill bodes well for India's clean mechanism projects

Business Line , Wednesday, May 19, 2010
Correspondent : Vishwanath Kulkarni
New Delhi, May 18

The recently introduced climate Bill in the US, which seeks to curb emissions by setting up a cap-and-trade mechanism, if passed, will strengthen the post-2012 carbon trade and could open up a new market for the Indian clean development mechanism (CDM) project developers.

The American Power Act Bill introduced by Senators John Kerry and Joe Lieberman last week seeks to reduce emissions by 17 per cent by 2020 compared with 2005 levels and has explicit provisions to allow CDM credits.

The APA Bill proposes an overall cap of 2 billion offsets per annum to be traded from 2013, of which about 500 million offsets will be accepted from international projects.

“It is very good news for the Indian project developers,” said Mr Aseem Chaturvedi, Senior Consultant at Emergent Ventures, an integrated climate change company.

“If passed, the Bill would ensure that Kyoto CERs (certified emission reduction certificates) have a market not just limited to the European Union, but in the US as well. This creates high demand certainty thereby encouraging more and more CDM projects to be taken up,” Mr Chaturvedi added.

India is a big market for CDM projects and accounts for about a fourth of the over 2,144 CDM projects registered with the UN Framework Convention on Climate Change (UNFCCC).

Big market

The CERs obtained from the CDM projects are traded in the carbon market that is currently dominated by Europe.

India is the second largest seller of CERs after China and accounts for about a fifth of the over 41 crore CERs issued by the UNFCCC.

“The Bill is quite a positive for the carbon trade” said Mr Ram Babu, CEO of General Carbon, a carbon advisory firm.

“At this stage, the US market for offsets looks twice that of Europe. However, it may not be as liquid and unrestricted as Europe,” he added.

Carbon credits earned from four category of projects including renewable energy, energy efficiency, waste energy and afforestation would be allowed to trade in the US market.

“It will open a new market for the Indian CER sellers,” said Mr Anmol Singh, Director at Gensol Consultants, a carbon advisory. With certainty of carbon trade beyond 2012, the pace of carbon credits coming into markets from India could gain steam going forward, Mr Singh said. He estimates that some 100 million credits will come from India between 2013 and 2015 as against a total of 100-odd million credits issued over the past 3-4 years.

The current carbon trading mechanism is backed by the Kyoto Protocol, which comes to an end in 2012.

With the European Union proposing to continue its emission trading system beyond 2012, there is already a certainty building in the market place and several transactions are now happening for the post 2012 offsets.

“If the APA Bill is passed, it would certainly strengthen the post 2012 market by creating a much larger demand for offsets, thereby spurring even greater investments in such projects,” Mr Chaturvedi added.

 
SOURCE : http://www.thehindubusinessline.in/bline/2010/05/19/stories/2010051953051800.htm
 


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