The Hindu Business Line : ‘China getting the better of India in carbon credit trading’

Chinese projects are much bigger compared with India, said Mr Sudhir Kaul, Trading Head at Vitol, which has an international Certified Emission Reduction (CER) trading platform, based in Singapore.

“While the biggest project in China produces an estimated 11 million CERs a year, the biggest in India produces only 4 million a year.” It is also more difficult to conclude deals in India compared with China, he added, saying that there are “many bottlenecks in terms of capacity and time, leading to more rejections of projects in India”.

Mr A.K. Perumal, Director, Birla Carbon Management, said, “With the current international contract for selling CERs expiring in 2012 and the registration period taking 18-20 months on an average, Chinese companies are now more inclined to go for clean development mechanism (CDM) projects because of larger volumes, while Indian companies are sceptical considering the short span for earning lower volumes of credit”.

The fact that the Chinese renewable energy sector does not enjoy subsidies and tax-holidays also makes it necessary for them to adopt CDMs for attaining viability of the project, he added.

Market volatile

According to Mr Kaul, “The market for carbon credit is extremely volatile. Prices can move up or down dramatically. Buyer countries prefer China because of the efficient risk management and fast conclusion of deals at larger volumes and comfortable prices.” Indian companies mostly prefer to sell at spot after getting registered for CDM rather than engage in the futures market. This, however, Mr Kaul said would work in India’s favour only when the market is bullish, while China will have an advantage in a bearish market scenario.

Having been dethroned from its leading position as a seller of CERs, India is now on the verge of getting out-numbered by China in having the maximum number of registered CDM projects. China and India are the biggest players in the carbon credit business, while the biggest buyers are the European countries.