Price of Carbon Credits set to Go Up

Carbon credit prices may go up after deal on Kyoto extension
Namrata Singh, Times of India news

MUMBAI: Carbon credit prices , which have crashed to euro 5 per unit currently, way below the psychological euro 10 per unit level, are expected to revive at least on one count: The continuation of Kyoto Protocol for another five years, thus securing the long-term fundamentals of the Indian greenhouse gas (GHG) emission reduction market.

While the uncertainty on the extension of Kyoto was causing much concern among Indian project developers, a key factor which led to a fall in prices of carbon credits was the Eurozone crisis which continues to bog the business of environment . A positive outcome at the Durban climate meet, announcing the extension of the Kyoto Protocol from 2013 to 2017 has, however, put to rest speculation surrounding the future of clean development mechanism (CDM) projects.

Experts believe prices of carbon credits could rise to the euro 8-10 range in 9-12 months. By 2013, these may even appreciate to euro 12-15 per unit. However, there was no immediate reaction of the Durban outcome on carbon credit prices which continue to rule low.

P Ram Babu, CEO, General Carbon Advisory Services, said carbon credits are expected to start appreciating in the next two to three months. “Indian companies are enthusiastic about the outcome on the climate agreement at Durban. Companies are expected to once again gear up on the CDM projects front,” said Ram Babu.

Carbon credits, which are also called certified emission reductions (CERs), are offsets of international emission trading scheme implemented to mitigate global warming. A CER is a type of emission reduction unit issued by the CDM executive board under the Kyoto Protocol to projects which mitigate GHG emissions . One CER is issued per tonne of carbon dioxide (CO2) mitigated by a project.

“At least, now there is no uncertainty with respect to Kyoto Protocol’s continuation. We will continue to invest into technologies which will help our projects reduce GHG emissions ,” said Seshagiri Rao, joint managing director, JSW Steel, whose two projects are registered with the CDM with issued CERs of nearly one million .

In the last couple of months, prices of carbon credits fell by more than 50%, thus halving the total value of the CER market to $ 5 billion. Indian carbon credits account for about 25% of this market, which is around $1 billion.

According to Ashutosh Pandey, CEO – advisory business , Emergent Ventures, an integrated climate and clean energy company, “The Durban outcome would create an even bigger carbon market. Longer term fundamentals are good, although we don’t see much change in the short-term .”

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