DNA : India losing out on carbon credits : Oct 15, 2006

India Inc is sitting on a goldmine, but seems hesitant to go for it.
Companies ranging from Reliance Energy to National ThermalPower Corporation,
and Tata Chemicals to Chambal Fertilisers, have failed to take advantage of
carbon credits, where certified reductions in the emission of greenhouse
gases (GHG) can be sold at a premium on exchanges to companies in developed
countries.

Under the Kyoto Protocol to reduce greenhouse gas emissions, signed
voluntarily by 150 countries – the US is a major exception – global
companies that have exceeded their emission levels can eithercut down
emissions or buy carbon credits from developing countries.

To avail themselves of this extra stream of income, companies in developing
countries like India have to make some technology changes that will result
in a lowering of carbon emissions. Once this reduction is certified by
organisations like Ernst & Young and EcoSecurities, the value of this credit
is tradable at a premium.

About 60-70% of greenhouse gas emissions are created by fuel combustion in
industries like cement, steel, textiles and fertilisers, apart from power.
But bureaucratic sloth and a general lack of awareness on ways of monetising
carbon credits has resulted in many Indian companies losing an opportunity
while Chinese and Brazilian companies are making hay, say carbon credit
experts.

A majority of power generating, transmitting and distributing companies in
India, including Tata Power, Reliance Energy and Power Grid, have so far not
partaken of this multi-million euro bonanza. Nor have fertiliser companies
such as National Fertilizers, Deepak Fertilizers, Tata Chemicals and GNFC.
Even Suzlon Energy, among the global majors in wind turbine energy, has lost
an opportunity in getting its wind farms in Tamil Nadu registered for carbon
credits, which could have generated another stream of revenue for its
business.

Pranav Nahar, director at EcoSecurities, one of the leading companies in the
world for carbon trading, says his company strikes at least 10 carbon credit
contracts a week. “In India, we would be happy to do at least 10 contracts a
year.”

Power transmission in India comes with a large percentage of transmission
and distribution losses. If these are reduced, they can automatically
qualify for credits, says Nahar.

So what are Indian companies losing out on? The sums are mindboggling, says
Nahar. “Some of the fertiliser companies are losing close to 20 million to
30 million euros (Rs 115-180 crore)”, he says. “The return on investment is
fabulous.” To avail oneself of this extra stream of income, companies have
to make some technology changes which will result in a lowering of carbon
emissions.

Surprisingly, smaller companies, including those involved in biomass
projects, and poultry farms, have done extraordinary work in this segment,
Nahar said in an interview to DNA Money. There are many success stories, but
the failures outnumber successes. While Gujarat Fluorochemicals is slated to
get at least Rs 1,000 crore in the span of a few years, Navin Fluorine
missed this opportunity. In this business, the first mover has all the
advantages, says Nahar.

The other sectors that can tap this industry, he says, are the
municipalities by fulfilling certain conditions such as setting up waste
water treatment plants, sanitary landfills, etc.

Waste gas capture in the form of landfill methane projects remains a very
important project type, with specialist project developers such as
EcoMethane being established specifically to design and run these types of
projects. Other promising sectors include coalmine methane capture, cement,
and fertilisers. The credits are more for EcoMethane projects.

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