Green to black: India Inc tops carbon trading, firms cash in
ABHISHEK KAPOOR
GANDHINAGAR: 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).
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.
abhishek.kapoor@expressindia.com
URL : http://www.indianexpress.com/story/15354.html