The Hindu Business Line : Carbon trading: Cos may not see big money now

This is because the carbon credit buyers normally pay the seller when the credits are delivered into the buyer country's emission reduction account. The mechanism that would allow the transfer of carbon credits (called the international transaction log/ ITL) is expected to be in place only by 2007.

Currently, eight Indian projects are registered at the UN, whereas about 134 have been given host country approval by the Ministry of Environment. The registered projects include those of Dharmshala Hydro Power, Deepak Spinners, Alwar Power Company, Gujarat Fluorochemicals, Kalpataru Power Transmission, Clarion Power Corporation, Shree Renuka Sugars and Dehar Grid Project in Himachal Pradesh by Astha Projects.

Different contracts: There are slightly different contracts though. Some buying parties pay up a certain portion of the total value of carbon credits when the certified emission reductions (CERs) are issued and are kept in the temporary registry at the UN. However, in these deals, the buyer usually pays a lower value per CER, since he cannot reflect these carbon credits as a part of his emission reduction compliance. CER stands for one tonne equivalent of carbon dioxide reduction.

"Most of our contracts are designed for payment on delivery in the buyer country's account," said Mr Anthony Hobley, Director-Legal Policy, Climate Change Capital (CCC), a UK-based merchant banking firm.

, "Normally, contracts say that sellers get paid on delivery of CERs into the buyer's account. This transfer is not possible before the ITL is in place," said Mr Robert Taylor, Director of Agrinergy, a player in the carbon credit market.

Pay on delivery: "Though most of the buyers want to pay on delivery in their registries, we do see some buyers who agree to pay upon issuance of CERs," the Associate Director of PricewaterhouseCoopers, Dr Ram Babu, said. "Some of the contracts are designed to ensure payment when CERs are issued in the interim account in the CDM registry," Mr Hobley said.

There also are instances where buyers make some payment when the project is registered at the UN's Clean Development Mechanism Executive Board. However, the seller gets a lower price in such deals.

Upfront payment: Pointed out Ms Ishani Chattopadhyay, Director, EcoSecurities, a UK-based carbon fund, "Some contracts allow for 25-30 per cent upfront payment at registration for prompt-start projects. However, the prices are at a discounted rate." "There are contracts involving upfront payments to sellers upon registration. In such contracts, normally 30 per cent of the value of total carbon credit transaction is paid," said Mr Taylor, adding that the seller has to provide a bank guarantee in such deals.

For very good quality projects, some clients of CCC pay 30-50 per cent upfront at registration or even before registration, said Mr Hobley. But the CER prices are even lower in such cases as the buyer takes a risk, he added. "We are now seeing some contracts where payment transfer takes place when the contract or the emission reduction purchase agreement is signed," said Mr Taylor.

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
Overseas business to contribute 35% of Tata Group revenues by 2010

Monsoon may revive at weekend

GAIL to acquire licence for STD services

Motorola, Bharti Teletech enter into distribution pact

Advisor for IA divestment, IPO to be finalised soon

Passenger cars sales up 7.6 pc in October, motorcycles 29 pc

Carbon trading: Cos may not see big money now

Shah Rukh may campaign against smoking — Health Ministry keen to rope in Bollywood star

Is India ready to tackle bird-flu

Maran to lead team to IT summit in Tunis

TCS, SBI form joint venture to offer banking consultancy

`Escorts sale tussle has not hit business'

H-P, Microsoft announce joint SMB initiative