While the politics of climate change will continue to generate heat and dust even after the Bali conference for negotiating a climate change treaty, businesses engaged in reducing global warming gas emissions are already upbeat because their global market is in any case growing by the day.

In 2006, the global carbon trading market was valued at more than $30 billion, including Clean Development Mechanism (CDM) segment worth $5 billion, by International Emissions Trading Association. The association estimates the market to be worth $60 billion by the end of 2007.

If fighting climate change is a global business opportunity, then CDM is the weapon for businesses to become part of the solution rather than the problem in developing countries like India. CDM enables rich countries to earn credits by investing in projects that lead to reduction of emissions in developing countries and trade these credits to meet their emission targets. One certified emission reduction (CERs) accrues on the reduction of one metric tonne of carbon dioxide equivalent and can be traded in carbon exchanges at about Euro 20 today.

The Union ministry of environment and forests has registered 827 CDM projects with the potential to generate 171 million annual CERs. Approval has been granted to 753 projects, which have the potential to generate 421 million CERs by 2012. Most of these projects are in energy efficiency, industrial processes and renewable energy.

The potential investment in nationally approved CDM projects till mid-2007 stands at about $15 billion (Rs 60,000 crore), according to the Union ministry of environment and forests. These projects should secure carbon credits worth $4.2 billion at business as usual prices by 2012, adds the ministry.

Out of these projects, the international CDM executive board has registered 283 projects (October 23, 2007). Today India?s projects constitute about 35% of the total projects registered with the CDM executive board, but they account for only 15% of CERs.

Explaining the anomaly, ICF International?s managing director Bishal Thapa says that India, like most others, logged on to the CDM bandwagon in 2004 with medium and small sector projects. Initially India registered moprojects in renewables like wind, hydro and biomass, which are relatively smaller projects. Subsequently registered projects comprise big industrial applications. ?So, India?s average emissions per project will go up by the day. Similarly India?s share of CERs worldwide will also increase.? ICF International is a consultancy in energy, climate change and environment.

India?s share of CERs is also likely to go up because large Indian public sector undertakings have just joined the fray. At the present, they account for only 10% of the approved projects. Besides, a few public private partnerships have also taken off recently. For example, Apollo Tyres has signed an agreement with GAIL for a project that rides partly on CDM. It offers GAIL the opportunity to sell about 50,000 CERs.

Saying that CDM is inherently a flexible mechanism, Onkar S Kanwar, CMD, Apollo Tyres, adds, ?It provides an ideal platform and ample scope for meaningful and practical innovation. Strong public-private partnerships can lead to mutually beneficial alliances provided the synergy established is seamless and reliable.?

Besides, Indians are also learning to pitch the projects right in the first place, reducing the chances of rejection. So far quite a few projects have been turned down. For example, Kolkata-based EF Energy?s project was rejected for lack of baseline data. CEO Kailash Mishap says there is need to get frameworks and structures in place to harness the full potential of the UNFCCC and the Kyoto Protocol.

Admitting that many Indian projects are getting rejected for various technicalities, V Raghuraman, an energy adviser with the Confederation of Indian Industry, says that India needs to develop methodologies and baselines in many sectors. There is a need to structure projects innovatively, he adds.

In fact, in a survey on Risks and Barriers to Clean Development Mechanism Projects, industry chamber Ficci says that the market needs an enabling regulatory and legal framework for policy, technology and finances .

Yes bank MD & CEO Rana Kapoor adds, “Governments should work closely with the UNFCCC to simplify national registry and also work to establish standardised baselines particularly for small and medium projects.? The UNFCCC implementation process also offers scope for improvement. The UNFCCC can further simplify the methodologies and registration process . Currently, the entire process is driven by high cost, MNC consultants, which add to project cost and do not really offer value to host products, he adds. A new-age bank, Yes Bank is in the final stages of developing a working relationship with a London-based CDM broker.

Most importantly, a clear road map post-Kyoto after 2012 will be the most enabling factor. ?The regulators and policy makers need to send a strong long term signal and create transparent and market-friendly processes to let business take over in fulfilling its obligations in an economically sustainable manner,? says Deepak Asher, group head (corporate finance), Gujarat Fluorochemicals (GFL). GFL is India?s largest refrigeration gas producer and has got about 10.6 million CERs since its inception.

The road map will have to be laid down well before 2012 when the Kyoto Protocol expires and Bali is just the starting point. It?s a long negotiation process and till then it will be business as usual for the carbon trading market. Carbon trading specialist Ecosecurities is already structuring greenhouse gas emission reduction projects beyond 2012. They are not alone. The World Bank has launched Carbon Partnership Facility for buying CERs between 2012 and 1022.

Says Ravi Jhunjhunwala, chairman, LNJ Bhilwara Group, ?The CDM market is anyway getting broader and deeper. Even, voluntary emission reduction is taking root.? Elaborates O P Ajmera, president (Finance), Bhilwara Energy Limited, ?We are negotiating to sell 2,50,000 annual CERs from our Malana Power project in the voluntary market. Since the project was up in 2000, it did not qualify for carbon credits. Our second hydro project too has a CDM component and has sold 500,000 annual CERs.?

CDM is not only about securing investments and clean technology for poor countries from rich countries.

It?s also about economic and environmental sustainability in the developing world. It?s becoming a two-way street. For example, SRF is investing profits from carbon trading into environmental initiatives. Says Ashish Bharat Ram, managing director, SRF Ltd, ?We have used cash flows from CERs to augment our efforts in sustainable development besides investing in our core businesses.? SRF?s chemical business has got 9.6 million CERs till now.

In fact, economic and environmental sustainability go together, says Kamal Meattle, CEO, Paharpur Business Centre & Software Technology Incubator Park. ?Being green is profitable in itself,” he says. He should know. He is setting up a notified special economic zone, GreenSpaces, near Delhi. Apart from aiming to set new highs in energy efficiency, the project is factoring in a CDM project. It is like icing on the cake.