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India Inc holds back carbon credit sale

According to reports, faced with oversupply in the global carbon credit market, resulting in a drastic fall in realisation, India’s leading corporate houses have kept the sale of around Rs 1,000 crore worth of these credits on hold.

They plan to sell the certified emission reduction (CER) certificates, popularly known as carbon credits, on revival of economic sentiment in Europe, the major buyer from India. With Europe’s economic troubles, the prices of CER plunged to euro 9-10 early this year but recovered a bit to trade on Monday at euro 12 each, as against euro 14.07 each about a year before.

Similarly, European Union carbon allowances for delivery in December have lost almost 16 per cent this year because of an oversupply amid a recession, concerns about economic growth and a sovereign debt crisis. The contract rose three cents to euro 11.94 a tonne on the ICE Futures Europe exchange. One allowance carries the right to emit one tonne of carbon dioxide.

Henry Derwent, president and CEO of the Geneva-based International Emissions Trading Association (IETA), has suggested Indian companies look beyond the US and European markets for selling CER. Japan and the EU are finalising specifications on what kind of carbon credits they seek while the next round of Clean Development Mechanism (CDM) guidelines are drawn up, as the existing ones end in 2012. Experts, however, do not rule out an extension in the CDM, mainly because of an unfavourable global economic environment.

“CER (demand) is a function of manufacturing activity, which depends upon the health of the overall economic environment. The price of CER fell to a nadir post the economic debacle in 2008 and it’s repeating now. Hence, we advise Indian corporates to hold CERs they have generated after an investment worth crores and years of effort, and wait for a revival in the market for sale,” said an economist with a leading Indian corporate house.

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