Cos dump green projects as carbon credits lose value

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MUMBAI: Indian corporates are shelving green projects that would have earned them carbon credits, which have seen a 50% fall in value due to the global economic slowdown. Companies are instead focusing on their existing renewable energy plans, which help save costs.

Before the crisis, many companies launched industrial clean development mechanism (CDM) projects, which required substantial investments but earned them carbon emission reduction (CER) units. CER are points issued by the CDM executive board for emission reduction, and verified under the rules of the Kyoto Protocol. These units can be encashed by selling them to polluting units, which are required by the protocol to buy these units.

Renewable energy projects, which use wind, water or biomass energy, usually involve lower costs compared to CDM projects. “The focus is now only on renewables, where the revenue is still intact,” said Chaitanya Kalia, partner, climate change and sustainability services, Ernst & Young.

Ispat Energy has shelved a Rs 500-crore glass furnace, gas-based power plant that was to start operations in March 2009. “The delay is for other reasons, but it comes at a convenient time,” said Shishir Tamotia, CEO, Ispat Energy. “The Kyoto Protocol, which is coming up for review in 2009, has a lot of uncertainties around it. This is also one reason why people are going slow on CDM projects,” he added.

Green Ventures, which launched a $300-million India Carbon Fund last year, is also rethinking plans. Vinay Bharathwaj, director, Green Ventures, explained: “The current market realities suggest a need for us to strategically reposition ourselves.” He added that the uncertainty in global markets was making it difficult to predict short-term price dips or pricing trends.

Green Ventures plans to invest around 80% of the fund money into renewable energy assets (particularly hydro-electric projects) in India and Nepal. The rest will probably be used to buy credits based on transactions with third-party developers with whom the company earlier had associations.

But there are some sectors like telecom which are still going strong. Anurag Vashistha, senior vice-president, energy management
, at telecom network service provider GTL, said the company has already appointed a clean energy consultant. GTL is working on reducing power and diesel consumption of the cell site of telecom service providers through various technologies.

This will reduce utilisation of fossil fuels like coal and gas, which entitles them for CERs,” he said.