Carbon credits may get dearer, Indian cos to gain
Last Updated : 7/28/2008 5:01:19 AM
Source : TNN

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Prices of carbon credits could firm up this year benefiting Indian clean development mechanism (CDM) projects, with the 2007 emissions data suggesting that EU is polluting more despite its best efforts to curb carbon dioxide (CO2) emissions. The recent release of verified emissions data for EU shows a 1% rise in CO2 emissions in 2007, over the previous year. This is expected to generate a renewed effort on the part of EU companies to buy more carbon credits in order to meet stricter commitments for remaining compliant. This, said industry experts, would have a positive impact on Indian CDM projects and the prices of certified emission reductions (CERs), going forward. Several compliant buyers/trading companies are buying CERs in India on a continuous basis. The prices may increase further towards the end of the year in case the compliant buyers fall short of their carbon credit purchase targets during the year. We believe that the prices shall remain firm through the year. India should definitely gain from the same, said Vishal Kedia, head of emerging businesses, Enam Holdings. Secondary CERs are currently trading at around euro 15-16 levels as compared to euro 17-17.5 levels during the most part of January 2008. The fall was partly due to the implications of the review of the EU ETS (emission trading scheme) by the European commission in January 2008 and the general depression in the global equity markets. The verified emissions data for EU has surprised industry participants, as there was an expectation that carbon emissions would come down due to various factors like cheaper gas prices, a mild winter, etc. Since this has not happened, the industry feels that there will be tougher commitments in phase II, which could lead to increased buying of EU Allowances (EUA).This slight increase will have a positive impact on the price sentiments of EUA at a fundamental level since there was an expectation of a lower emission in 2007 compared to 2006 and the data indicating higher emissions meant that not enough abatement has happened in EU in 2007, said Suresh Iyer, deputy GM, JSW Steel. Iyer said this will not have a bullish impact on CER prices as factors affecting CER demand/supply, and in turn prices, are different from those affecting EUA prices.