The Hindu Business Line : Kyoto Protocol comes into force — Investments to flow in for energy efficient projects

WITH the Kyoto Protocol coming into force from Wednesday, many sectors including small hydropower generation, biomass, municipal solid waste management and sugar mill-cogeneration projects are likely to receive investments from countries aiming to meet their emission targets by 2012.

Under the Protocol, developed countries are required to reduce emissions of green house gases (GHGs) by an average of 5.2 per cent below 1990 level by 2012. The Protocol aims to bring down the level of GHG so that interference with the climate is minimised.

India has already ratified the Kyoto Protocol on August 26, 2002.

"Thirty-five industrialised countries and the European Community are now legally bound to reduce their combined emissions of six major GHGs during 2008-2012, which is the first commitment period, to below 1990 levels," explained Mr Y.D. Babu, Area Convener & Fellow, Centre for Global Environment, TERI.

One of the provisions of the Protocol — Clean Development Mechanism (CDM) — establishes a framework within which the industrialised countries can meet a part of their carbon dioxide emissionreduction requirements by purchasing Certified Emission Reductions (CERs) from developing countries like India.

Those Indian projects that can be verified as clean energy projects, which lead to lower carbon dioxide emissions than would otherwise occur, can generate CERs and sell them. These CERs, prices of which are market determined, are generated through an international due diligence process. In fact, many consultants and financial analysts are emerging in the area of evaluating projects for their emission reductions.

At present, CERs are priced at about $6 for a tonne of carbon dioxide emission reductions, which is about $1 more than it was one year ago. Most assessments predict that this price would rise to about $8 to $10 in about three to five years, which is when the deadline approaches.

Given the current price of $6 for each tonne of carbon dioxide emission reduction, renewable energy projects would secure an additional revenue of about 15 to 20 paise for each unit of electricity that they produce, enhancing the project's rate of return by about 1 to 2 per cent, informed an official release.

The increase in the project rate of return is much more substantial for waste to energy projects where the increase can be of 5 per cent or more. These projects collect the methane generated in landfills and burn it to produce electricity. By reducing emissions of methane, which is 20 times more potent a green house gas than carbon dioxide, the project secures significant additional source of revenue.

Moreover, the Protocol's Adaptation Fund, established in 2001, can become operational to assist developing countries to cope with the negative effects of climate change. Two per cent of all CDM trading will go to the Fund.

On the domestic front, an inter-ministerial committee set-up to process CDM project proposals has approved 54 projects. The proposals are then sent to an international CDM Executive Board in Bonn.

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