India CDM developers confident of post-2012 market-poll

Mon Jun 28, 2010 12:18pm IST

* Indian CDM investors see growing market for offsets

* Poll finds most support for renewable energy projects

* Post-2012 forward contracts for offsets gaining favour

By David Fogarty

SINGAPORE, June 28 (Reuters) - Nearly 70 percent of clean-energy project developers in India believe there will be a post-2012 successor to the U.N.'s Kyoto Protocol climate pact with binding emissions targets, according to a poll.

And nearly 60 percent expect markets in the United States, Japan and Australia will accept tradeable carbon offsets from their projects, the poll by Emergent Ventures India (EVI) said.

EVI, a leading Indian clean energy project developer and advisory firm, polled 63 project developers in May on post-2012 market for offsets under the U.N.'s Clean Development Mechanism and prices for their offsets.

CDM, part of the Kyoto Protocol, rewards investors in projects that cut greenhouse gas emissions in developing countries.

Investors earn offsets called certified emissions reductions (CERs) used by governments or companies in rich nations to meet emissions reduction targets. India is the world's second largest source of CERs after China, and Europe is the top buyer.

The poll found that nearly 90 percent of respondents were very confident or reasonably confident that their CERs would have a market value after 2012, despite growing concerns over the shape or even existance of the CDM after 2012.

The Kyoto Protocol's first phase ends in 2012 and talks on a successor pact have bogged down.

The European Union has also said it might limit CERs sourced from some types of projects and from larger developing nations from 2013, the start of the bloc's tougher third phase of its emissions trading scheme.

UPBEAT

Indian project developers remain upbeat about the market, the poll found, despite the gloom that followed last December's climate talks in Copenhagen.

"The post-Copenhagen negative vibes about the carbon market has been somewhat offset by the recent appreciation of CER prices," EVI says in the poll.

CER futures traded on the European Climate Exchange CEREZ0 hit a high of just over 24 euros in July 2008, plunged to 7.35 euros in early 2009 but have stabilised at around 12 to 13 euros over the past year.

Nearly 90 percent of respondents were certain that credits from renewable energy projects would be accepted into the EU's emissions trading scheme from 2013.

Just over 40 percent thought credits from projects that destroy industrial gases, such as HFC-23, might also be allowed, even though their acceptance in the EU's emissions market seems increasing uncertain.

India is primarily a market for CER spot contract trades, but forward contracts were becoming increasingly favoured for post-2012 CERs, EVI said.

"This is being done to hedge the risk that the post-Kyoto Protocol carbon market faces. This makes sense given the carbon market is young, volatile and 2013 onwards seems all the more uncertain," said analyst Zubin Sarkar, who conducted the survey.

Expectations of post-2012 CER prices, though, were modest.

"Considering time value of money and discounting factors, the price expectations for post-2012 CERs by the respondents were moderate with 83 percent expecting a nominal price below 20 euros," the poll found.

It also found that 37 percent of project developers thought now was the best time to sell CERs, while 35 percent felt towards the end of 2012 would be the right time. (Editing by Ed Lane)

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