Financial Daily from THE HINDU group of publications
Saturday, Oct 19, 2002
Jindal Vijaynagar to trade carbon emission Govt clearance awaited
S. Gopikrishna Warrier
CHENNAI, Oct. 18
JINDAL Vijaynagar Steel can earn up to $225 million over the next 10 years by trading with developed countries the carbon dioxide emissions that it hopes to reduce by using the less polluting Corex technology. The company is awaiting clearance from the Union Ministry of Environment and Forests for trading carbon dioxide emission reductions.
According to Mr J.K. Tandon, Joint Managing Director and Chief Executive Officer, the company proposes to trade up to 15 million tonnes of carbon dioxide reduction with any developed country buyer over the next 10 years. It expects to get an average price of $12 to $15 per tonne of carbon.
If the steel company realises both the quantity and value projected, it could earn up to $225 million as revenue in the next 10 years. It could also be among the earliest Indian companies in the larger manufacturing sector to generate money by selling carbon credit to developed country buyers.
According to Mr Tandon, Jindal's steel plant has a two-way savings on carbon dioxide emissions. First, the plant uses Corex technology for its furnace, which uses coke instead of coal. Further the gas that is generated is used for power generation. "This doubly improves our carbon dioxide balance."
Though the company had two furnaces using Corex technology at its plant at Vijayanagar in Bellary district in Karnataka, only the second plant would be eligible to trade carbon, he said. The first plant was set up in 1999, before the Clean Development Mechanism (CDM) of the Kyoto Protocol was worked out in 2000. The second plant becomes eligible since it was set up in 2001.
According to Mr P.K. Sarkar, General Manager (Energy and Environment), the Corex furnace emits 0.4 tonnes of carbon dioxide less than the conventional blast furnace while producing one tonne of hot metal. Each of the two Corex furnaces have a capacity of 0.8 million tonnes per year. This quantity of emissions saved from Jindal's second Corex plant can be banked and traded to any buyer from a developed country under CDM.
Along with this, Jindal would also take benefit from the fact that the hot gases from both the Corex furnaces are being used to generate 160 MW of power, he added.
Jindal officials say developed country buyers the Netherlands, Canada, the US, Japan, Australia have contacted the company to buy carbon.
Since the developed country organisations and companies have a 10-year period to fulfil their greenhouse gas emission reduction requirements, it is expected that the price available for carbon at present may not be high. However, according to Mr Tandon, the price is expected to rise closer to the 2012 deadline, since the developed country companies not meeting the reduction targets will have to pay a penalty of $25 per tonne.
The company, which had its project documents prepared by PricewaterhouseCoopers Ltd, is awaiting the `host country endorsement' from MoEF.
Mr Sarkar said that along with the project documentation, the company had also prepared its baseline data on emissions. Further, it has assigned an independent body to carry out the international validation of the data.
Though the process of getting certified emission reductions will take time, the trading commitments is likely to start once the MoEF endorsement comes through.
CDM and carbon trading
CLEAN Development Mechanism (CDM) is one of the flexible mechanisms developed as part of the international Kyoto Protocol negotiations to reduce global greenhouse gas emissions. Since only the developed countries have the mandate to reduce their emissions to five per cent below their 1990 emission levels, CDM permits them to buy carbon credit from developing country companies.
Thus, if an Indian company like Jindal manages to use a technology that reduces its carbon dioxide emissions, it can bank the tonnes of carbon that it has saved through innovation and trade it in the international market to developed country buyers. The buyers can then use the credit thus bought to meet their emission reduction targets.
The trading has to be conducted in the next 10 years since the developed countries have to meet their emission reduction commitments by 2012.
The six greenhouse gases for which there are emission reduction targets are carbon dioxide, methane, nitrous oxide, hydrofluorocarbons, perfluorocarbons and sulphur hexafluoride.
However, the unit used for measuring emission reduction is tonnes of carbon dioxide equivalent (tCO2e).
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