India's carbon credit claims to triple in 3 years

The number of carbon credits or certified emission reduction (CERs) issued for a cut in the release of greenhouse gases into the environment is set to triple in India over the next three years, due to a rising number of claims from rapidly growing renewable energy (RE) projects.

According to the latest report by research firm Crisil, Indian projects are estimated to receive 246 million CERs by December 2012, a three-fold rise from 72 million in November 2009. This will cement India's second position in the global CER market, the report said.

Each tonne of obnoxious gases -- including CO, CO2, NOx, SO2, etc -- saved from being released into the environment amount to one CER. Developing countries generate CERs by installing emission-cut machineries and developed countries, mainly from Europe, buy CERs for releasing more of gases than they are supposed to.

Of India's 1,846 RE projects as of November 2009, only 15 per cent were registered with the UN Framework Convention on Climate Change (UNFCCC) under the clean development mechanism (CDM). These projects had generated around 13.5 million CERs up to November 2009. Assuming a price of ¤10 for one CER and an exchange rate of Rs 65 per euro, these CERs are estimated to be worth Rs 8.7 billion.

As of November 2009, RE projects in India accounted for about 19 per cent of the total CERs issued in India. With capacity additions in RE projects and registration of more of these, the share of CER issuance of RE projects was expected to increase to 31 per cent of the total CERs issued in India in December 2012.

As of early November 2009, the installed RE power capacity in India was around 15,500 Mw, accounting for only 10 per cent of the country's total installed power generation capacity.

Crisil believes that CER issuance, purely from registration of existing and new RE projects, will increase to 76 million by December 2012, from 13.5 million in November 2009. Assuming a price of ¤10 for one CER, additional issuances of CERs from RE projects will be worth about Rs 40 billion by December 2012.

In 2009, 64 per cent of CERs issued in India were for hydro-fluoro-carbon (HFC) reduction projects, mainly in refrigerant-producing factories. However, CER issuance growth in HFC reduction projects is expected to be relatively small, as most players in this industry have gradually moved to non-HFC refrigerants. This would lead to a halving in the share of CERs issued for HFC reduction projects, to 33 per cent, by 2012.

China is the leader in the global CDM market. India has the second-largest volume of CER issuance in the world; it also has the second-largest number of projects registered with UNFCCC. An increase in CER issuance volumes from the RE industry will help India maintain its second position in the global CER market over the next three years.