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The Kyoto Protocol to the Convention on Climate Change has come into existence on February 16, 2005. This Protocol adopted in December 1997, commits industrialized countries to reduce their combined basket of six greenhouse gas emissions by at least 5 percent compared to 1990 levels by the period 2008-12. This legally binding agreement promises to produce historic reversal of the upward trend in emissions of greenhouse gases that started in industrialized countries some 150 years ago.
Climate Change
Greenhouse gases (GHGs) refer to the atmospheric gases responsible for causing global warming and climate change. The emission of green house gases by India is very low, both in terms of per capita as well as aggregate emissions, amounting to about 3 per cent of global greenhouse gas emissions.
The potential adverse impacts of climate change could provide major setbacks to development process in India because of changes in rainfall patterns, agricultural yields, intensity and frequency of extreme weather events and sea level rise etc. Therefore, early and large decreases in emissions of greenhouse gases from the industrialized countries are necessary to reduce the urgency and scale of adaptation efforts.
India has already ratified the Kyoto Protocol on August 26, 2002. India is not required to reduce emission of Green House Gases (GHG) under the Protocol under which basically the developed countries are required to reduce emissions of GHG by an average of 5.2 per cent below 1990 level by 2012. The Protocol seeks to stabilise Green House Gas concentrations in the atmosphere at a level that would minimise interference with the climate system.
Clean Energy
Clean energy is all set to undergo a major expansion worldwide in the post-Kyoto Protocol World, as it entails the industrialized countries to reduce their emissions of carbon dioxide and other greenhouse gases, which are changing global climate patterns. The industrialized countries would need to accelerate the introduction of renewables to meet these requirements, as well as reduce energy consumption by promoting efficiency of energy end use, and enhance the absorption of carbon dioxide in trees through greater afforestation.
One of the provisions of the Kyoto Protocol, known as the Clean Development Mechanism (CDM), allows developed countries to finance GHGs emissions-avoiding projects in developing countries, and receive credits for doing so which they may apply towards meeting mandatory limits on their own emissions.
CDM thus establishes a framework within which the industrialized countries can meet a part of their carbon dioxide emissions reduction requirements by purchasing Certified Emission Reductions (CERs) from India and other developing countries. These CERs are generated through an international due diligence process that continuously monitors and verifies that clean energy projects in developing countries are indeed leading to lower carbon dioxide emissions than would occur otherwise. The sale of these CERs provides an additional revenue stream to clean energy projects, thus increasing their financial viability.
Income from Waste
The price of the CERs is market determined, and is expected to rise as the demand for CERs increases with the coming into force of the Kyoto Protocol. The current price of CERs is about $6 for a tonne of carbon dioxide emission reductions, which is about $1 more than it was one year ago. Most assessments predict that this price would rise to about $8 to $10 in about 3 to 5 years.
At the current price of $6 for each tonne of carbon dioxide emission reduction, renewable energy projects would secure an additional revenue of about 15 to 20 paise for each unit of electricity that they produce, enhancing the project’s rate of return by about 1 to 2 per cent. The increase in the project rate of return is much more substantial for waste to energy projects where the increase can be of 5 per cent or more.
This is because these projects collect the methane generated in landfills and burn it to produce electricity. By reducing emissions of methane, which is 20 times more potent a green house gas than carbon dioxide, the project secures significant additional source of revenue. This increase makes it profitable for private investors to collect garbage and manage landfills – which could have a major impact on the management of solid waste in our cities.
Benefit for India
As a result of the opportunities unlocked by the CDM, the Indian private sector is fast emerging as the largest potential supplier of CERs in the World. India is currently number one in terms of the number of projects accorded the host country approval and under consideration by the CDM (Clean Development Mechanism) Executive Board, as per the provisions of Kyoto Protocol.
The Government of India, through the Ministry of Environment and Forests, has established an inter ministerial committee to process and approve CDM project proposals before they are sent to an international CDM Executive Board in Bonn. The inter ministerial committee meets once a month, and has already approved 55 projects.
According to National Strategy Study (NSS) on CDM implementation in India, done by Tata Research Energy Institute (TERI), India can capture 10 per cent or more of the global CDM market during the first commitment period, earning up to 100 million USD per year.
It further recommends that high quality CDM projects must be developed within the next two years (2005 and 2006) for India to capitalise on its CDM potential during the first commitment period 2008-12. As energy sector contributed the largest share of total GHG emissions in India in 1994, the GHG mitigation potential in the power sector lies in adoption of technologies such as super critical power plant, IGCC (integrated gasification combined cycle) and through renovation and modernisation of existing plants.
NSS finally adds that together these options can achieve a cumulative
GHG emission reduction of about 102 million tonnes by 2012. In addition, power generation through renewable energy sources and municipal solid waste offers substantial potential for emission reduction.
As a result of this activity, a large and strong industry of consultants, financial analysts and CER traders has also developed to support CDM activity. Recently, several CDM project developers, NGOs and consultants came together to form a CDM stakeholders association called the Indian Carbon Market Group (ICMG).
Road Ahead
The vigorous project development activity in our country, and the proactive stands adopted by the Government, has propelled India to become the most favorable destination for CDM investments. At the national level, India has created an efficient National CDM authority for according host country approvals.
India’s CDM potential represents a significant component of the global CDM market. Implementation of the CDM in India can deliver significant local, economic and sustainable development co-benefits. A higher level of effort is required in the large energy consuming public and private sectors to harness CDM in support of national strategies and sectoral programmes.
The framework provided by the Kyoto Protocol thus will lead to an active and vigorous market for green house gas reductions, which will in turn promote investments in renewable energy and energy efficiency in India, and will thus support sustainable development while conserving the global environment. (PIB Features)
*Information Officer, PIB, Delhi
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