Monday, July 18, 2005

Carbon credits

Carbon trading is the hottest thing in the Indian stock markets these days. Trading close to an all time high, stocks which are touted to start trading in carbon credits have run up to crazy levels. The hottest on or off the block has been Gujarat Fluorochem and SRF.

Todays Economic Times had a good piece on it. Here are some snips.

...
The ‘Kyoto Protocol’ requires industrialised country signatories to reduce their emissions by 5.2% below ’90 levels (base levels) during the ‘ commitment period’, i.e. ’08-12. ... The focus of the Kyoto Protocol, however, is on the reduction in the levels of the following six gases: Carbon dioxide (CO2), Methane (CH4), Nitrous oxide (N2O), Hydrofluorocarbons (HFCs), Perfluorocarbons (PFCs) and Sulphur hexafluoride (SF6). ...But the Protocol will not apply to developing but signatory countries such as India, China and Brazil. They, however, are free to sell ‘carbon credits’ to other countries....

So thats the big deal for some companies in the Indian markets. The US and Australia are not signatories for this protocol, for various reasons.

...Any project which reduces the emission of greenhouse gases, are eligible for ‘carbon credits’. These projects can be broadly classified into the following categories/types: Energy Efficiency, Renewable Energy, Fuel Switching, Waste To Energy and Industrial Process...

...
According to the Kyoto Protocol, all countries are required to reduce their greenhouse gas emissions by 5.2% from 1990 levels, by the year 2012, or shall have to pay a price to those who do it for them. The idea was to reward those countries that maintain discipline in this regard. Once the CERs are allotted to a project, the holder can trade in the same. Here, the buyer purchases ‘CERs Credits’ (also called ‘Carbon Credits’) generated by a project as one purchases any other goods & services. Carbon Credits are also traded at CO2E Exchange in UK, CDM Exchange in Europe andthe Chicago Climate Exchange (CCX). However, as for most of the trades there is no standard contract for purchasing carbon, it is not easy to find out prices...

The piece also has info on Indias role, whos buying the carbon credit that these companies sell and so on. So, some people have made money on carbon credits already, whether or not global greenhouse emissions have reduced.



1 comment:

Anonymous said...

while the stock prices are shooting through the roof, one really wonders..has the cash flow started to come in for these companies...? or is it just a bubble?

heard also was textile companies gaining carbon credits..

caution is the word...