'The CDM process is complex, but a lot of it is essential to maintain the integrity of emission reduction claims'

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CantorCO2e is a global environmental brokerage and offers services in transactions, financing and technology for the reduction of carbon dioxide emissions. Ram Babu, managing director, CantorCO2e India, demystifies issues related to Clean Development Mechanism (CDM) of the Kyoto Protocol, which allows rich countries to buy emission credits in developing countries to offset emissions in their own countries. He also highlights the challenges as well as the opportunities in emission reduction in India in an email interview with FE. Excerpts:

The share of CDM in the carbon trading market is low. Why is it so?

The growth rate in the supply of certified emission reductions (CERs) is coming down and the demand is capped within European Union Emission Trading Scheme (EU ETS). But the demand we are talking of now is only a part of the demand to meet Kyoto compliance. There is a projected compliance shortfall of carbon dioxide emissions of 2.3-2.7 billion tonne. To make the actual and real impact on our climate and to control global warming, we need to achieve higher growth of emission reduction project activities. As there are still many untapped CDM opportunities in developing countries, the growth rate can further be increased if the CDM executive board’s processes are duly streamlined.

Though India leads in the number of CDM projects, the country is a distant second after China in CER volumes. What is the reason?

In terms of the number of CDM projects, India is still number one in the world, but China leads with a significant share in terms of volume of CER generation potential from registered projects. The share size of the economy is the reason for this. But in issued CERs, India is lagging by less than 10%.

Many projects from India are getting rejected. Similarly, validation of older projects has got tougher. Why is it so?

The issuance of CDM projects is falling short of registration by at least 30%, mostly due to a shortfall in project performance and due to changes in the methodology. The CDM body comes up with frequent changes on regulations and guidelines. Also, lack of skilled people in the industry leads to a longer validation process/cycle. Innovations and technology should be given due focus to increase the success rate of CDM registration in India. Many projects in India are facing problems at the registration stage due to earlier start dates.