The countrys dominance in carbon trading is expected to be driven, not so much by the domestic industry, but more by its huge tracts of plantation land, estimated to be over 15 million hectares, much larger than Australia which aims to be a major player in emission trading by adding 2 million hectare plantation by 2020.
The report points out that certified emissions reductions (CERs) are the currency of the clean development mechanism (CDM). CERs can be used to acquire technology, capital investments in projects aimed at reducing carbon emissions.
Seeing the importance of the carbon bazzar, the Bank has entered into an agreement with Infrastructure Development Finance Company (IDFC) last month wherein IDFC will handle carbon finance operations in the country for various carbon finance facilities. The agreement initially earmarks a $10-million aid in a World Bank-managed carbon finance to IDFC-financed projects that meet all the required eligibility and due diligence standards.
The exercise is expected to leverage an investment of $100 million for climate-friendly projects in the first phase, says World Bank country director for India Michael Carter.
Trading carbon credits is a new mechanism designed to allow firms that fail to meet emission standards set by the 1997 Kyoto Protocol, to buy credits from other firms that meet their targets, says Mr Carter.
The Kyoto Protocol envisages carbon credit trade between countries with carbon sinks (planted forests) and others that produce higher levels of pollution. Although the US has not ratified the Protocol, American companies are in the forefront in supplying the CDM.
The many projects initiated by the domestic companies after January 2000 in diverse areas such as energy efficiency, co-generation, natural gas alternative fuels and hydel power will also add to the countrys dominance as a larger seller in the carbon market.
The carbon emission reductions market has doubled in volume in the last one year alone but few of its benefits are reaching the developing countries, says, manager of the carbon finance at the World Bank Ken Newcombe. The countries like the US, Germany, Japan and China are likely to be the biggest buyers of carbon credits.
Carbon dioxide which is generated by industrial emissions and effects climate change is absorbed by trees from the air. They use this to make sugar, starch and complex molecules such as cellulose and lignin, forming wood, branches, roots leaves and bark. About 50 per cent of a trees dry weight is carbon. Planting 100,000 hectare of new forest can remove a million tonne carbon annually from the atmosphere.