The Hindu Business Line : `Give sops to power utilities to go in for carbon trading projects'

THE Ministry of Environment and Forests has approached power sector regulators, asking them to incentivise power utilities to go in for projects that can earn revenues through carbon trading.

This comes in the wake of concerns raised by power utilities on whether they would be required to pass on all the benefits of possible carbon credit earnings to their consumers by lowering tariffs. Power sector regulators decide the tariff for companies based on an assessment of the revenue stream and cost estimates for a fiscal. Any additional revenue stream is normally taken into account by the regulators while deciding the tariffs for consumers. Additional earnings, which could include earnings through carbon trading, would have to be passed on to the consumer, translating into lower tariffs.

"We have suggested to various State regulators in the power sector to encourage companies to adopt cleaner technologies so that they can earn additional revenues through carbon trading. "Depending on the size of revenues, utilities could be asked to pass on a certain portion of the benefits to the consumers. But they should not be required to pass on the entire earnings under this head to the consumers," said a senior Environment Ministry official.

There is great potential in the power sector for large clean development mechanism (CDM) projects, resulting in substantial reduction of green house gases. "Power utilities could generate huge volumes of carbon credits," said the Ministry official.

Utilities such as NTPC have already shifted towards the cleaner and highly efficient 660-megawatt `super critical boiler' technology for their new power stations from the 250-MW and 500-MW technology that is currently in use.

"Even though the overall costs are higher in setting up a station incorporating the 660-MW technology, the utilities could tide over the incremental costs through additional revenue streams that include carbon trading," said an NTPC official.

The CDM was designed to achieve cost-effective greenhouse gas mitigation for industrialised countries. The Kyoto Protocol, which came into force on February 16, makes it obligatory for 37 developed countries to reduce their emissions of six harmful greenhouse gases, including carbon dioxide. They can do this through a combination of direct domestic action and investment in developing countries that reduce these emission levels.

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