The silence at Cancun on the future of the Kyoto Protocol has cast a cloud of uncertainty over the emission trading business (carbon credits) in India.
Experts are interpreting the situation in different ways, with the overall view being that the emission trading business has to stay in one form or the other, if carbon emissions are to be reduced. However, for now, the $2 billion per year market for Indian companies is in a jeopardy.
Under the Kyoto Protocol, polluting industries in Europe were allowed to pay polluters in developing countries such as India to cut their emissions. For cutting down their emission of carbon dioxide, Indian companies get ‘emission-credits’, which can be sold to European firms that need to reduce their pollution.
The prevailing price of emission credits is a little over 11 euros for a tonne of carbon dioxide. However, as the Kyoto Protocol hasn’t been extended beyond 2012, it is not clear whether there will be a market for carbon credits post 2012. This market, currently worth $2 billion per year is in jeopardy because of the uncertainty, says Mr Kishore Butani of carbonyatra.com.
Earlier, buyers used to routinely purchase credits for the next ten years, but now they will be no longer willing to look beyond 2012, he adds. Another issue Mr Butani said is that every month India used to submit 20 projects for prior consideration for carbon credit to Kyoto. “There’s uncertainty over these projects. We will have to see if there is a decrease in this,” he said..
However, some see a silver lining as well. Dr P.Rambabu, CEO of General Carbon says that the Cancun agreement highly positive for the carbon markets as it has reduced the uncertainty period over whether the international offset market will exist. Now it is clear that the current regime won’t last beyond 2012.
This could lead to development of smaller national markets for trading carbon emissions, as individual countries try to reduce pollution.
“The basic need for carbon credits remains the same as we believe that carbon credit pricing will be stable and the present uncertainty is temporary,” says Mr. Sudipta Das, India leader for climate change services, Ernst&Young, who had attended the conference at Cancun.