Human activities have been increasing the concentration of green­house gases (GHG) in the atmosphere and that in turn has enhanced the green house effect, which is commonly known as global warming. The impact of climate change or global warming has been disastrous leading to rise in average global temperature, which is expected to go up by one to four degrees Celsius in next 100 years. There will also be change in preci­pitation quantity and pattern, vegetation, increasing storm surges and the increase in sea level With its impact being felt across the globe, the concept of green is slowly gaining momentum in order to emit lesser GHG, particularly carbon dioxide (CO2).

Kyoto Protocol
The concept of carbon credit came into existence in order to increase the awareness of the need to control emissions of six GHG gases across the globe. The mechanism was formalized in the Kyoto Protocol, which took place in Kyoto, Japan in 1997, was finally rolled into motion from February 2005. The Kyoto Protocol establishes legally binding commitments for the reduction of four GHG-carbon dioxide, methane, nitrous oxide, sulphur hexafluoride-and two groups of gases-hydrofluoro­carbons and perfluorocarbons, which are produced by Annex I (industrialized) nations, as well as general commitments for all member countries. Under Kyoto Protocol, industrialized coun­tries agreed to reduce their collective GHG emissions by six percent compared to 1990. As of October 2008, 180 states have signed and ratified the Kyoto Protocol to the United Nations Framework Convention on Climate Change (UNFCCC), aimed at combatting global warming.

Carbon credit and CDM
As a part of the Kyoto Protocol, the Annex I countries agreed that their companies could reduce carbon emission either by adopting various new techno­logies, or by helping the com­panies in developing countries to emit less and in turn, be credited for the amount of carbon that has been saved.

Kyoto Protocol established three mechanisms to supple­ment national actions to achieve long-term and cost effective GHG reductions called Interna­tional Emission Trading (IET), Joint Implementation (JI) and Clean Development Mechanism (CDM). While IET and JI are followed among the Annex I countries, CDM is the one involving both Annex I and non-Annex I countries, like India and China. The companies in Annex I countries which were unsuc­cessful in achieving their carbon emission targets could tie-up with a company in a developing nation to help them in setting up eco-friendly technologies and in turn gaining credits for their own country. This could be achieved only if the project in the developing country is found to be a CDM and that is cleared by the UNFCCC.

Qualified CDM project
Swaminathan Krishnamurthy, expert in climate change and sustainability services, believes that any project initiative planned by a company, which emits GHG in the atmosphere, could be a potential CDM project. Krishnamurthy, who works with the consulting firm Ernst & Young said, “Any company that is availing carbon credit must first ensure that it has estimated the carbon footprint (amount of carbon emitted by the company) of its organization. Only then would it be able to measure how much carbon it has saved for the year and avail credits for that.”

There are quite a few factors involved in a CDM project. Firstly the GHG emissions reductions resulting from CDM project activity must have real, measurable, and long-term benefits related to the mitigation of climate change and reduc­tions in GHG emissions must be additional to any that would occur in the absence of CDM project activity. The carbon credit is measured in terms of Carbon Emission Rate (CER), where one ton of CO2 is equivalent to that of one CER.

Carbon market in India and role of SPs
Developed countries have to spend nearly $300-$500 for every ton reduction in CO2, against $10-$25 by developing countries. India's GHG emission is below the target and so, it is entitled to sell surplus credits to developed countries. India is considered to claim about 31 percent of the total world carbon trade, which can give $25 billion by 2010. This is what making carbon trading a hot trade in India.

According to Krishnamurthy, lot more IT, ITeS companies in India have shown interest in the carbon trade. “These companies emit lots of carbon due to the usage of hardware's and hence show keen interest in carbon trade. Besides the social respon­sibility in reducing carbon emissions, vendors mainly join in due to peer pressure and to showcase themselves as socially respon­sible people to their clients. Many Indian companies have been re-rated on the stock markets on the basis of the bonanza that will accrue to them when carbon trading kicks off,” he claimed.

Currently, India takes part in an open-market carbon trade, where lots of consultants and brokers are ready to buy carbon from companies so that they can stock up on them and make good amount of money when the demand rises in another year's time in the global market. Rosanne Rodricks, Managing Editor, Carbonyatra.com, a portal launched specifically for giving information about the nuances and activities in the carbon market claimed that, “India is the largest beneficiary, claiming about 179 out of the total 550 projects that were registered by the UNFCCC through the CDM as of March 19, 2007. It is expected to rake in at least $5 billion to $10 billion (Rs 22,500 crore to Rs 45,000 crore) over a period of time.” She added that Indian banks have already tied up with interna­tional buyers to pool CERs generated by SMEs and sell them globally in market lots of CER units.

Even though it is not possible for an IT solution provider (SP) to act as a carbon consultant as it is a different ball game alto­gether, they do play a vital role in the carbon credit business. “The IT solution provi­ders can definitely communicate the benefit of carbon credit to their clients and help them to emit less amount of carbon. Hereby they play a vital role in the society as they are able to provide more value addition to their services. On the other hand the IT solution providers play a vital role in suggesting the right kind of solution and technology that could help the companies to emit less and thereby gain more out of that activity,” said C Rajashekar, CDM Consultant, Symbiotic Research Associates.

Rocky roads
Rajashekar also claimed that it is not easy for a company to avail carbon credits as there are too many restrictions and procedures to follow. “A company going for CDM must first get an approval from CDM executive board, national CDM authorities and check whether it has complied with all the rules and regulations. The case is then validated by a third party agency, called a Designated Operational Entity (DOE), to ensure the project results in real, measurable, and long-term emission reductions. The Executive Board (EB) then decides whether or not to register (approve) the project. If a project is registered and implemented, the EB issues credits, called Certified Emission Reductions to project participants based on the monitored difference between the baseline and the actual emissions, verified by the DOE,” he briefed. Besides that he informed that the cost involved per project submission and getting it approved itself would be nearly Rs 20-25 lakh. “Even if a company submits the project, the approval ratio of CDM projects in India is still low and there is no security for the money spent on that,” added Rajashekar.

NR Sethuraman
(sethuramannr@cybermedia.co.in)

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