India's carbon fighters must wait
As world reassesses emissions policy, young green industries appear in limbo

By Rama Lakshmi
Monday, October 19, 2009

NEW DELHI -- Giant mountains of smelly kitchen waste, bottles, coconuts, plastic and paper in the heart of New Delhi's industrial district are being transformed into rich, black organic fertilizer for farming.

The treatment is good for the environment in more ways that one: It creates both fertilizer and carbon emission credits for a German company that is paying the Indian firm for treating the trash. It has been going on for only a year, but now there is fear that it may not last.

In a sign of how widespread the global impact of carbon emissions is and how far-reaching the efforts are to reduce them, dozens of similar projects in India, China and Brazil face uncertainty after 2012 because of a failure so far to renew provisions of the historic Kyoto Protocol meant to cut greenhouse gas emissions.

Last week, representatives from 177 nations met in Bangkok to work on ways to extend and expand the climate change agreement in anticipation of a global summit on the subject in Copenhagen in December. Some industrialized nations want to abandon the treaty and work on a new agreement, in part because some leaders believe it will be the only way to persuade the United States -- the largest industrialized nation that refused to sign the agreement -- to join. The Kyoto accord calls for developed countries to cut the their 1990 level of greenhouse gas emissions by 5 percent by 2012.

Less developed nations were not required to make the cuts. But a new business model flourished when those nations -- including China, Brazil and India -- launched environmentally friendly enterprises and began selling carbon credits to companies in more advanced countries such as Australia, Japan and Germany.

Meeting the goals

India and some of the other less industrialized countries have refused to adopt mandatory cuts in greenhouse emissions, saying the burden should fall heaviest on those nations that have caused the problem and can afford the changes. But they also are deeply interested in maintaining the Kyoto goals both for the environment and for their own economic well being.

"What will happen to the projects and the money invested?" said a senior Indian environment ministry official who spoke on the condition of anonymity because he is not authorized to speak to the media. "What will be the shape of the carbon market after 2012?"

He said that there is little time left before the December summit to come up with a new treaty. India has 460 green businesses registered for carbon credits, second only to China's 642 projects.

Mahesh Babu, chief executive of IL&FS Ecosmart, which operates the trash-to-fertilizer operation in New Delhi, said: "With such projects, developed nations can meet their carbon emission targets at one-tenth the costs. We . . . reduce toxic run-offs into our sacred rivers and enhance soil productivity. It is a win-win."

But those in favor of a new treaty, including the United States and the European Union, want to bind large, emerging economies like India and China into accepting internationally verifiable emission targets. India has resisted, claiming that its per capita emission is far lower than those of wealthier, developed countries.

But Babu says carbon markets show how the world can collaborate. He hopes that at least the carbon-trading component of the Kyoto accord will be retained in a new treaty, so that India can help itself and others cap emissions at a fraction of the cost.

This year, the Asian Development Bank gave a $5 million advance to Babu's company against future delivery of carbon credits.

The advance helped transform a massive, disease-spreading, toxic dump site in Mumbai into a lush, landscaped garden by capturing methane. The bank manages a carbon fund for some European countries for purchase of carbon credits from emerging markets.

With more funds and technology, Babu says, he will work on converting the captured methane into fuel.

"Carbon markets are a good way of accelerating the involvement of developing countries in global emission reduction." said Ajay Mathur, director of India's Bureau of Energy Efficiency. "If there is a hesitation in adopting new technology because of the cost risk, the carbon trade makes them do it sooner."

American help

Indian carbon entrepreneurs say the proposed U.S. clean energy bill, now pending in the Senate, will expand the global carbon market even more. The bill seeks to impose stringent emission targets on U.S. industry but also allows for international carbon reduction offsets.

But in recent months, the trading price of carbon credits has stopped rising in the international carbon exchanges because of the economic slowdown and the general uncertainty about the Kyoto Protocol.

"In the run-up to the Copenhagen summit so far, the differences have mostly focused around emission cuts," said Anuradha R.V., a climate change lawyer with Clarus Associates, a New Delhi-based law firm. She said that international delegates have held discussions aimed at simplifying the approval process for carbon credit projects. India, among other developing countries, wants forest creation to be included in an expanding list of activities that earn credits.

But even if the carbon market should thrive again, critics in India urge caution. India has become the world's fifth-largest producer of greenhouse gases in recent years. Its rapidly growing economy means it may soon be facing the same calls for emissions cuts that industrialized nations face now.

"We are exhausting all our low-hanging fruit by selling carbon credits to rich countries," said Seema Arora, principal counselor for sustainable development at the Confederation of Indian Industry. "When our turn comes to fulfill emission reduction targets, who will we buy from?"

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