Global CDM market is all set to double in 2010, says new study

: The global Clean Development Mechanism (CDM) is set to look up. The Certified Emission Reduction (CERs) credits issued under CDM would double by 2010, says new research by IDEAcarbon, a carbon rating agency. CERs are issued by the United Nations Framework Convention on Climate Change (UNFCCC) to projects in developing counties for reducing the emission of planet warming greenhouse gases (GHG). Reduction of one tonne of carbon dioxide per year earns one CER.

It’s in contrast to this year when CERs are expected to drop from 137.8 to 118-135 million tonne of CO2 equivalent over 2008. KPMG’s associate director Arun Kumar explains, “It’s because the emissions of GHG in carbon intensive industries in industrialised countries have fallen due to drop in industrial output during the economic slowdown.” For example, the fall in EU’s GHG emissions by 1.3% in 2008 over 2007 has been partly attributed to the economic slowdown by the European Environment Agency.

Now the signs that global economic recovery may have begun with countries like Germany and France coming out of recession promise to recharge the market. Even US Clean Energy and Security Bill, which is pending approval by the Senate, provides for offsetting up to 1.5 billion tonne of carbon annually. CER prices have already started firming up even though at Euro 13 or $18.50, they are lower than what they were a year ago (Euro 20 or $28.50).

Says Ashutosh Pandey, practice head, Emergent Ventures India (EVI), “The prices should stay in this range for the next couple of months till the outcome of the UN Climate Change Conference in Copenhagen in December is known.” The conference is expected to negotiate on the emission reduction targets of industrialised countries under the Kyoto Protocol of the UNFCCC.

It’s industrialised countries that drive the CDM market by buying credits in developing countries like India to meet their emission reduction targets. Developing countries like India don’t have any binding emission commitments under the

Kyoto Protocol. India is a buyer’s market. The country had a 4% market share in terms of volumes, having transacted 15.8 million CERs in 2008, according to State & Trends of the Carbon Market 2009 published by the World Bank.

Up to March 17, 2009, the UNFCCC executive board had registered 398 Indian CDM projects. These projects have secured an investment of Rs 1,51,397 crore ($30 billion). Another 828 projects approved by India at the national level are awaiting the UNFCCC...