It has its roots in the Kyoto Protocol which came into force in 2005 and envisages a reduction in the emission of 6 polluting gases by industrialized nations in the period 2008-2012 by at least 5.2% as compared to the 1990 levels and is monitored by the UNFCCC. However, given the high level of industrial activity in such nations, it is difficult to achieve these standards and hence they have been given an option to purchase CERs (Certified Emission Reduction) from developing nations, giving rise to the Carbon trading market. The buying and selling of these CERs enables the industrialized nations to continue running their industries at similar levels of output while providing the developing nations the necessary capital and technology to use more eco-friendly sources of power.
Procedure to earn CERs
The procedure is to be followed by an organisation to apply to the UNFCCC for registering the carbon credits and the conditions that a project must satisfy in order to be eligible for getting CERs. He also talked about the various kinds of projects that fall under the Clean Development Mechanism (CDM) of emission reduction, the major industries that could benefit under this scheme and the major buyers of such credits. In this context, the kind of projects that have been initiated by GACL, of which 2 have already been registered by the UNFCCC, and the kind of cash flows that were associated with the projects.
Growth Prospects in India
The Economists view is that while the recession had adversely affected the CDM market both in terms of volumes and value; it was on a recovery path. Comparing India and China, the two biggest players in this market, they also mentioned that while China had a larger share in the number of registered CDM projects as compared to India, the quality of Indian projects was considered as superior to the ones from China and this is something Indians could aim to capitalize upon.
After doing a SWOT Analysis of the CDM projects, he concluded that their future hinges on whether the Kyoto Protocol is extended beyond 2012. He concluded that if it did the opportunity for Indian organisations to benefit from would be immense.
This session on Carbon Trading Mechanism was extremely interactive and provided an enthusiastic assemblage of students with keen insights into the CER industry along with instilling in them a desire to continue learning about this nascent but important field.