Companies have failed to take advantage of carbon credits, where certified reductions in emission of GHG can be sold at a premium.
MUMBAI: India Inc is sitting on a goldmine, but seems hesitant to go for it. Companies ranging from Reliance Energy to National Thermal Power 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 either cut 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.
What are carbon credits?
Carbon credits are measured in units of certified emission reductions (CERs). Each CER is equivalent to one tonne of carbon dioxide reduction, and these can be traded.
Every tonne of reduction in greenhouse gases involves an investment of $300-400.
Global companies that have exceeded their emission levels can either cut them down by making the needed investments or buy carbon credits from developing countries. Trading takes place on two stock exchanges, the Chicago Climate Exchange and the European Climate Exchange. Trading can also take place in the open market. European countries and Japan are the major buyers of carbon credit because the US has till not accepted the Kyoto Protocol on global warming.
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