Environment – carbon credit “Manufacturing” – a new sector with industrial growth
Did you know that companies can now buy and sell “carbon credits” internationally just like other goods and services that are regularly bought and sold on the international market?
There are two important prerequisites for this new carbon credit business:
1) Your country must have signed the Kyoto Protocol (the US has not yet signed it as of March 2007). These credits are made possible by the Kyoto Clean Development Mechanism (CDM). This is why this new line of business is sometimes called simply the “CDM” business.
2) You must register your “carbon saving” project with the UN before you can sell your credits to other international buyers.
India’s leading energy company Oil and Natural Gas Corp has done just that. ONGC expects to sell 850,000 tonnes worth of ‘carbon credits’ (ie the right to emit that much carbon dioxide into the atmosphere) for Rs 600 million – or RS 705 per tonne.
The current rate for carbon credits on the international market hovers (in March 2007) around €11 to €12 per ton.
Some studies suggest, for example, that the total “carbon credit potential” of New Zealand’s forests could add up to $13,000 to $20,000 per hectare over the lifetime of the forest. Why? Because trees remove carbon dioxide from the atmosphere.
Who knew the “right to pollute” could be such a lucrative growth market?
Who buys these carbon credits? Western companies from Kyoto Protocol countries that for one reason or another are unable or unwilling to reduce their carbon emissions. Such companies find it cheaper to buy the right to emit CO2 from more efficient companies in the developing world like ONGC. The Indian giant has announced that it will register 11 energy-saving projects to reduce gas flaring with the United Nations by the end of 2007. This will of course lead to a new permit to sell more carbon credits and more revenue for ONGC to reduce CO2 emissions .
Projects to reduce heat loss in industrial plants or to upgrade turbines and equipment for more efficient energy production are all projects that qualify for carbon credits.
Particularly profitable are those projects that limit emissions of methane gas, since methane is 21 times more powerful than carbon dioxide in terms of contribution to the greenhouse effect.
This is an incredible opportunity for developing countries to get rich while they repair their energy infrastructure. This seems to be one case where you can have your cake and eat it too.
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