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There has been a spurt in Indian companies rushing to get clean development mechanism (CDM) projects registered with the United Nations Framework Convention on Climate Change ahead of December 2012.
This is despite the prevailing uncertainty in the global carbon trade, which is reeling under the impact of Eurozone debt crisis, fears of a recession and lack of clarity in climate policy.
Prices of Certified Emission Reduction (CERs) or carbon credits have slipped to a three-year low to less than €8 as against €12 in the early part of the year.
“The rush to register projects will only accelerate and we are seeing an increase in enquiries,” said Mr P. Rambabu, CEO, General Carbon, an advisory firm.
This is mainly because the European Union is ready to accept CERs generated from CDM projects till the end of 2012 in the third phase of EU Emission Trading System — 2013 to 2020. Such a move by EU would provide some sort of continuity for the carbon trading mechanism that hinges on the Kyoto Protocol, which expires in December 2012. Climate change negotiators are yet to arrive at a consensus on the replacement for Kyoto Protocol.
The CDM enables developed countries to meet emission reduction targets by investing in clean energy projects in developing countries. Such projects are granted tradable carbon credits by the UNFCCC.
Mr Anmol Jaggi, Director, Gensol Consultants, attributes the spurt in CDM registrations to the improved processes and capacities at the UNFCCC. The registration time has come down to around 1.5 years against over two years earlier.
“The demand for Indian CERs is not as great as it used to be. We are advising clients to hold on to at least 50 per cent of their portfolio,” Mr Jaggi said. He expects the carbon prices to stay subdued over the next six months to a year due to lack of interest from investors, who are pulling out from stocks and commodity markets.
Indian firms are placing their bets by going ahead with CDM registrations, says an official with US-based carbon fund. “If there is a rebound in global carbon prices, they stand to gain.”
The crash in carbon prices is the worst since 2005, said Mr Rambabu. “Even the fixed contracts are being renegotiated and we have asked our clients to hold on to their CERs.”
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