The Hindu Business Line : UN panel meet to decide on carbon credit projects

THE fate of 50-odd Indian projects that hope to sell carbon credits would be decided over the next few days with the methodology panel of the United Nations Framework Convention on Climate Change (UNFCCC) meeting to approve new processes that can reduce green house gas (GHG) emissions.

If the panel does not clear the methods adopted by these projects, the companies may end up losing huge revenues that according to experts, could be around 72 million euros. The projects are from sectors such as sugar, paper, steel, sponge iron and fertilisers.

A Clean Development Mechanism (CDM) project needs to get its methodology approved for being validated. It is only after validation that projects can be registered at the UNFCCC. The panel has already approved 23 large-scale project methodologies. If the CDM projects are based on approved methods, then their validation process takes relatively less time than those that are based on new methods.

Getting validated and registered at the UNFCCC before 2005-end is important for these projects, since they started between January 1, 2000 and November 18, 2004 and could have generated certified emission reductions (CERs) during this period.

As per Kyoto Protocol rules, projects registered after December 31, 2005, can trade those CERs that they accumulate `after registration,' and they cannot liquidate the value of the net GHG emission reduced during the earlier period. Each CER stands for one tonne of carbon dioxide reduction and is tradable globally.

Dr Ram Babu, Associate Director, PricewaterhouseCoopers, said, "Methodologies awaiting clearance at the panel include fly ash mixing in cement and concrete for manufacturing cement and power generation from industrial bio-residues, and fuel switching from naphtha to natural gas while generating power.

"About 50 Indian projects based on these few methodologies from sectors like cement, sugar and paper are at various stages of clearance. Some are at the UNFCCC validation stage and some are at the host country's approval level."

On the extent to which these projects could be hit, he said, "These projects, together, have a potential to generate 30 million tonnes of CERs over 10 years. Roughly, if registered after 2005, they stand to lose about three years of CERs. At an average value of 8 euros per CER, the revenue potential over 10 years is 240 million euros. This translates to 72 million euros for three years." These are rough estimates with CER values ranging from 4-16 euros in India. The panel meeting, starting from September 12 is important, as the panel meets next in December, he said. Mr Dipankar Ghosh, Managing Consultant, Ernst & Young, said, "Several projects based on methods like fly ash blending (instead of clinker) while manufacturing cement and mixing fly ash concrete for cement mixing may be affected. Power cogeneration projects from the sugar sector are also in queue."

He, however, declined to comment on the extent of revenue loss if they are not cleared before this year-end.

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