The Hindu Business Line : JSW Steel gets clearance for its carbon credit project

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Mumbai Feb. 5 JSW Steel Ltd has received clearance for its carbon credit project from the Executive Body of the Clean Development Mechanism under the United Nations Framework Convention of Climate Change.

According to JSW's project design document, waste gases emitted by the company's Karnataka steel plant (7,500 tonnes per day) would be utilised for generating power for captive consumption. The project thus contemplates reduction of emission from both the steel and power plants.

Over a period of 10 years, the plant can potentially reduce carbon emissions to the tune of 7.67 million CERs. Each CER stands for one tonne equivalent of carbon dioxide reduced and can be traded globally.

At the current trading price of 15.5 per CER, the carbon credit earnings of the company can be estimated at around 109 million (or about $130 million) over a 10-year period.

The company is now awaiting verification procedure to be completed by the authorities to check if emissions are as per the project design document approved by the executive body. The company has appointed TUV India, subsidiary of the German-based company TUV Nord as verifiers.

"There could be some variations in the quantification of the credits upon verification," Mr Seshagiri Rao, Director-Finance, JSW Steel Ltd, told Business Line. The company is awaiting improvement in the carbon trading market. There is potential for the price to reach 40.0 per tonne. Market prices are driven by euro allowances.

European companies that reduce emissions more than the government set target would get credit themselves. They would in turn sell the credit to other companies whose performance has failed to meet the stipulated target. As a result, the credit market is largely confined within Europe itself.

The company is expected to realise on an average 0.77 million CERs per annum. The company can enter into a forward contract for the sale of entire quantity of CERs any time after verification is given and realise the monetary value from the buyer.