The Hindu Business Line : Buyers returning to carbon credit market

Price range
CER ranges from € 10-12 for 2008-12 delivery.
These prices are down by € 3-4 compared to the pre-crash phase.
For spot delivery, buyers are willing to pay up to € 16, against € 21.

New Delhi , May 30

European buyers have slowly started returning to the Indian carbon credit market, though the "level of activity" appears to be relatively lower than what it was in the pre-April end period — which is when the European carbon credit market had crashed. Moreover, there is a decline in prices that buyers are willing to pay for carbon credits for Indian projects vis-à-vis the prices they were ready to shell out per CER earlier.

Carbon credits are measured in units of certified emission reductions (CERs), with each CER equivalent to one tonne carbon dioxide reduction. Companies from the European Union, Japan and Canada can meet their mandated green house gas emission reduction norms by buying carbon credits from Indian companies.

Enquiries

Indian companies accumulate these credits, through a domestic and international approval process, by adopting cleaner technologies. For example, Senergy Global, a carbon trading firm, has started getting enquiries from "serious buyers", with demands from four of the top 20 energy companies — three from Europe and one from Japan, said Dr Ajay Mathur, the firm's CEO.

"The quantity of demand range from 200,000 CERs required by December 2007 to one million CERs by 2012," Dr Mathur said. However, prices that buyers are willing to pay per CER are in the range of € 10-12 for 2008-12 delivery, he said pointing out that the prices are down by about 3-4 than what buyers were ready to pay in the pre-crash phase.

According to Dr Ram Babu, Associate Director, PwC, "At present, buyers are willing to pay a per CER price of about € 10 for futures delivery. But for the spot delivery, we are still getting some queries where buyers are willing to pay even up to 16, against 21 in the pre-crash phase."

Mr Nishant Bhardwaj, General Manager, IT Power India, a company in the carbon trading space, said, "We have seen a drop in buyers after the crash. We buy credits primarily for 2008-12 delivery period. We were offering per CER rates of € 7-8 in the pre-April crash period as well as now. But these prices do not carry any penalties for non-delivery."

Volatility persists

"It appears buyers are back, particularly for the longer dated contracts," said Mr Robert Taylor, Director, Agrinergy.

He added that though European markets have now recovered to € 19, sellers should take note of the volatility and that the market can go down as well as up.

Prices for CERs had touched € 30 levels towards April end, before they crashed to a low of about € 11 following reports from several European countries that showed that their companies had adhered to the mandated carbon dioxide emission norms during 2005.

"Buyers are slowly returning, but the level of activity in terms of queries and prices aren't as high as they were in April," said another significant player in the market.