Recession helps reshape India carbon deals

By David Fogarty and Ratnajyoti Dutta

NEW DELHI (Reuters) - The recession and falling prices of U.N.-backed carbon credits are changing the way carbon deals are structured in India, project developers and consultants say, with more players seeking partners to spread financial risks.

India is the second top source of carbon offsets under the U.N.'s Clean Development Mechanism, or CDM, and until recently clean-energy projects were developed by Indian investors by themselves. Most usually hung on to the credits hoping for higher prices.

But with prices of the offsets called certified emissions reductions (CERs) falling and the number of credit buyers and investors declining, project developers are looking to find partners, such as utilities in rich nations or investment banks.

"There's this kind of a shift. More and more developers are looking to get the CDM costs funded through the buyer and then try to do a forward transaction," said Aseem Chaturvedi, senior consultant at Emergent Ventures India.

Emergent ranks among the top 5 CDM developers and consultants in India, with 28 registered projects and more than 200 others in the pipeline.

"The traditional Indian model is you develop it yourself, get it registered and sell it on the spot market. Now there's more interest in forward deals," Chaturvedi told Reuters.

At present, such forward purchase deals represented between 85 to 95 percent of the price of exchange traded CERs as of a certain date. This would be locked in for the entire contract, he said.

CERs traded on the European Climate Exchange were trading around 12.40 euros ($17.40) Thursday.