india to have new accounting norms for carbon trading

8/12/2019 India to Have New Accounting Norms for Carbon Trading

1/9

India to have new accounting norms for

carbon trading

A new set of norms to enable transparent accounting of the increasing number of carboncredits earned by Indian companies, which are presently classified as other income, is beingwritten by the Institute of Chartered Accountants of India (ICAI), the premier accounting

body in the country.

Once in place, experts say it will make it easier for banks to provide credit for such projects.We should be able to come up with the draft guidelines on carbon trading in six months. Thegroup constituted under accounting standard board of the ICAI is working on the nuances ofcarbon trading norms, said Ved Jain, president of ICAI. He added that India will take a lead

over other countries if it can successfully develop such norms.

At present, most companies show earnings out of carbon credit trading as other income asthey are not recognized by tax laws. Once an accounting standard is defined, companies willhave to show these earnings separately. Carbon credit, or certified emissions reductions(CER), are awarded by the CDM (clean development mechanism) executive board, an arm ofthe United Nations, to projects in developing countries that ensure or certify reducedgreenhouse gas emissions.

India, along with China, lead countries in earning carbon credits. According to governmentstatistics, around 35% of the total 819 projects registered by the CDM executive board arefrom India, the highest in the world. The Indian National CDM Authority has given hostcountry approval to 753 projects, facilitating investments of more than Rs63,000 crore. TheCDM executive board only considers projects approved by the host country.

These projects, which are in the sectors of energy efficiency, fuel switching, industrialprocesses, municipal solid waste, and renewable energy, have the potential to generate 421million CERs by 2012. Environment ministry officials say that at a conservative estimate,this means an inflow of some $4.2 billion (more than Rs17,000 crore).

Indian companies sell CERs to companies in developed countries, especially in Europe,

through bilateral deals or carbon exchanges. SRF Ltd, Gujarat Fluorochemicals Ltd, Oil andNatural Gas Corp. Ltd, and NTPC Ltd are some of the leading companies that use and sellcarbon credits.

Critics, however, question the relevance of new norms for carbon trading.

I dont feel that new norms are needed for carbon trading unless there is a tax angle. Istrongly feel these instruments should not be taxed as CDM gives certificates to discourageemission of greenhouse gases and therefore, earnings from carbon credit are for a biggercause, said a Delhi-based expert who advises companies on carbon trading.

Jain of ICAI defends the move. We still have to see whether carbon credi ts will be classifiedas asset or income and at what point of time should the asset or income be recognized.


2/9

Standardization will make the process of income recognition on account of carbon tradingeasier.

The industry fears that once standardized, the government may decide to tax incomes earnedthrough carbon trading as capital gains tax or even securities transaction tax if they are

treated as instruments similar to equity shares.

D.J. Yadav, group vice-president of Arvind Mills Ltd, which has recently applied for CDMprojects, said, If putting in accounting guidelines is a way to tax carbon revenues, then itsnot welcome.

An official at the Infrastructure Development Finance Co. Ltd, who advises companies on thefeasibility of CDM projects, but did not wish to be identified since he was not authorised tospeak to the media, said, Carbon revenues are a short-term gain, and ultimately, when globalmarkets mature, you cant make a huge profit on carbon revenues alone.

Green to black: India Inc tops carbon trading, firms cash in

Two Indian companies, one from Gujarat and the other from Haryana, both in the business of refrigerants,are leaders in the world of carbon trading that goes under the Clean Development Mechanism (CDM) ofUnited Nations Convention on Climate Change (UNFCCC).

In fact, Vadodara-based Gujarat Fluorochemicals Ltd (GFL), and Gurgaon-based SRF are likely to seetheir bottomlines grow more by selling carbon credits, a waste product, than their main business,refrigerants.

Declaring financial results today, SRF CMD Arun Bharat Ram said in the last quarter, the company made

Rs 149 crore from the transfer of Certified Emission Receipts (CERs, also called carbon credits); its netprofit stood at Rs 89 crore. One CER represents the non-emission or sequestration of one tonne of carbondioxide equivalent from the atmosphere.

As for GFL, against a post-tax profit of around Rs 130 crore in the last 12 months from its CFC business,executive director Deepak Asher claims a potential of upto Rs 400 crore per annum if we are able to sellall of our 6 million CERs. So far, GFL has received around Rs 350 crore (including advances) toward saleof carbon credits, Asher said.

His was the first Indian company to get registered for a CDM project in March 2005 for 3 million CERs.With 114 CDM-registered projects, India is currently the world leader.

Meanwhile, SRF which got registered for its 3.83 million CERs in December the same year, has taken thelead in actual trading accounting for 39 per cent of market share in the country.

... contd.

Job vacancy: CDM Country Mgr, India

Carbon News and Info

>

Jobs in climate change

>


3/9

Latest climate job vacancies

Monday, 4 August 2008

Perennia

http://www.pereniacarbon.com

CDM Country Manager, India

Perenia is a recently established joint venture between leading Australian companies Pacific Hydro

(http://www.pacifichydro.com.au) and SMEC International (http://www.smec.com.au). Together we

combine more than 50 years experience in the identification, design and operation of emission

reduction projects, coupled with extensive experience in carbon markets and internationally

recognized consulting services.

Working in partnership with our clients we provide a complete carbon solution for CDM, JI and VER

project across the globe, encompassing project development, origination, marketing and transaction

and project optimization services.

With an existing portfolio of projects in India and the support of SMECs established in country

presence we are seeking an experienced professional to grow and develop our Indian business. In

return we offer a dynamic work environment, an attractive remuneration package including

generous performance based incentives, and international career development opportunities.

Based in New Delhi and reporting to the Managing Director, key tasks and responsibilitiesinclude:

Identifying, securing and managing CDM origination and commercialisation opportunities

Establishing and maintaining client relationships

Coordinating interactions with the DNA and DOEs

Working with senior management to develop and implement a local business plan

Developing and implementing innovative approaches to market Perenias services and

enhance the company profile

Establishing and maintaining technical standards for all project outputs

Developing and managing budgets

Managing and developing staff

Presenting at conferences and events

Required Skills and Experience

Appropriate university qualifications

At least 3 years experience with the CDM and 10 years experience in a related technical

field (environment, energy management, power generation etc)

Proven experience in growing and developing a business

Strong analytical skills with a solutions orientated approach

Willingness to travel within India and to neighboring countries

Excellent communication skills, including fluency in English
http://www.pereniacarbon.com/http://www.pereniacarbon.com/http://www.pereniacarbon.com/


4/9

To make an Application

Please send your CV together with a brief application letter summarizing your suitability for the

position to Lucia Garbellini [email protected] 18th August 2008.

Carbon Market Infrastructure

Highest Quality, Worldwide Scope

APX is the leading infrastructure provider for environmental markets in greenhouse gasesincluding carbon commodities. These commodities include emissions allowances and carbonoffsets, sometimes called Verified Emission Reductions (VERs), Emission Reduction Units(ERUs), Certified Emission Reductions (CERs), Verified Carbon Units (VCUs), or CarbonReduction Tons (CRTs). Users of these systems include all key market participants such as

project developers, brokers, corporations, NGOs and government organizations.

APX greenhouse gas and carbon market infrastructure systems include:

The Gold Standard Registry

This international greenhouse gas registry provides account holders with an easy-to-use, web-based system that creates, tracks, and enables trading of Gold Standard Voluntary EmissionsReductions (VERs). The registry also serves as the Gold Standard's Clean DevelopmentMechanism/Joint Implementation (CDM/JI) project database to track the certification ofCertified Emission Reductions (CERs) and Emission Reduction Units (ERUs) for

international compliance markets.

Climate Action Reserve

The Reserve provides a web-based platform and account management tool for theregistration, serialization, tracking, and retirement of greenhouse gas offsets. Access to TheReserve is available to the public for information on registered projects and to accountholders including project developers, retailers, financial services, corporations and policymakers. GHG emission offsets attributable to projects that are verified in accordance withregistry protocols can be banked, sold, traded, and/or retired in the voluntary market.

The Voluntary Carbon Standard (VCS) Registry

Now, carbon market participants have a secure, web-based system to create, verify, track,trade and retire Voluntary Carbon Units (VCUs). The APX VCS Registry provides thehighest quality transaction and data infrastructurefor the voluntary carbon markets. TheRegistry creates trusted and tradable voluntary offset credits, provides a clear chain ofownership that prevents double-counting, and stimulates investments in emissions reductionsand low carbon solutions. Extensive public reports make the solution open and transparent.With more than 2 billion environmental credits under management, the 24/7 APX VCSRegistry is powered by the most widely used, highest volume, and technically advanced

environmental infrastructure that has been developed over nearly a decade.
mailto:[email protected]:[email protected]:[email protected]://goldstandard.apx.com/http://goldstandard.apx.com/http://thereserve.apx.com/http://thereserve.apx.com/http://www.vcsregistry.com/http://www.vcsregistry.com/http://thereserve.apx.com/http://goldstandard.apx.com/mailto:[email protected]


5/9

$100-bn Jackpot Awaits India In Carbon

TradeNew Delhi, November 29::There is a great opportunity awaiting India in carbon credittrading which is estimated to go up to $100 billion by 2010. In the new regime, the countrycould emerge as one of the largest beneficiaries accounting for 25 per cent of the total worldcarbon trade, says a recent World Bank report.

The countrys dominance in carbon trading is expected to be driven, not so much by thedomestic industry, but more by its huge tracts of plantation land, estimated to be over 15million hectares, much larger than Australia which aims to be a major player in emissiontrading by adding 2 million hectare plantation by 2020.

The report points out that certified emissions reductions (CERs) are the currency of the cleandevelopment mechanism (CDM). CERs can be used to acquire technology, capitalinvestments in projects aimed at reducing carbon emissions. s generated by industrialemissions and effects climate change is absorbed by trees from the air. They use this to makesugar, 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 100,000hectare of new forest can remove a million tonne carbon annually from the atmosphere....

Mass-market U.N. carbon scheme finds

favor in India

| Sourced FromIbtimes.com|

SINGAPOREA new type of U.N. scheme is spreading clean energy technology to millionsof people in India, promising to cut carbon emissions and help investors earn valuable carboncredits.

Two leading carbon offset project developers in India say the scheme offers the promise ofimproving livelihoods and greatly expanding the reach and potential investment returns of theU.N.s existing Clean Development Mechanism.

The CDM allows investors to build clean-energy projects, such as wind farms and solarpower stations, in developing countries and earn carbon offsets in return. These can be soldon to help buyers in rich nations meet mandatory emissions targets.

But the CDM is hampered because it is based on the approval of single projects, which cantake up to two years and is costly.
http://www.ibtimes.com/http://www.ibtimes.com/http://www.ibtimes.com/http://www.ibtimes.com/


6/9

The expanded scheme, called program of activities (PoA), aims to allow the launch ofidentical emissions-reduction projects across a much wider user base in a single program, socutting overall costs and simplifying the roll-out.

Indias the best place for PoAs. Theres a lot of hunger to do these renewable projects

because they know the government is committed, said Chandra Shekhar Sinha, headofenvironmental markets in Asia for J.P. Morgan.

The country of 1.1 billion people has large areas cut off from the electricity grid and is idealfor the deployment of clean energy via solar, wind or biomass, such as crop waste.

Areas that are linked often have old and inefficient lighting and powerlines that needupgrading and transport networks that need to switch to cleaner fuels.

Investment programs that can deploy cleaner energy and drive greater efficiency with thecarrot of revenue from selling carbon offsets are seen as a key way to help poorer nations

curb the growth of their greenhouse gas emissions.

SOLAR LANTERNS

J.P. Morgan is developing three PoAs in India and is evaluating others. One scheme involvesthe deployment of 1.2 million solar lanterns in the northern state of Bihar.

The other two cover the roll-out of more fuel-efficient commercial cooking stoves inrestaurants and biomass boilers and gasifiers for agro industries, such as sugar mills.

All three are estimated to yield about 12 million U.N. offsets called certified emissionsreductions (CERs) by 2012, Sinha said. CER futures traded on the European ClimateExchange closed at 13.76 euros on Thursday.

Ive seen many new projects coming up in programmatic CDM, Ashutosh Pandey, CEO ofEmergent Ventures India, told Reuters.

He said interest in PoA has surged over the past 6 months once some of the teething troublesof the scheme were overcome and he expected 15-20 programmatic CDM projects to belaunched in India over the next 6 to 12 months.

U.N. data shows that, globally, one PoA project is already formally registered and 15 moreare being checked out by U.N.-approved auditors. Several are in India.Emergent Ventures has several PoA projects under development, including transmission lineimprovement, street lighting upgrades and biomass gasifiers to generate power.

The street lighting scheme swaps out old systems for more efficient ones. We are startingwith a couple of cities and the program will be valid for 28 years and we hope to include 70-80 cities, Pandey said.

Programmatic CDM initially stalled over rules that would have saddled the U.N.-approvedauditors with liability costs over mistakes in the design or execution of projects already

registered and given credits.


7/9

Rule changes have partly removed this stumbling-block but other challenges, such aspreventing people from selling off their solar lanterns, compact fluorescent bulbs or portablestoves to make money, still remain.

Sinha said J.P. Morgans solution was not to subsidize the price of the solar lantern.

The consumer will still end up paying 850 rupees ($18) because thats the price they wouldpay, he said. Its the distributor that gets the carbon revenue stream so that they push thetechnology.

http://www.carbonoffsetsdaily.com/category/india-carbonmarketnews

At issue was a slate of new Bank-managed climate funds aimed at transitioning to a low carboneconomy. Two of the proposed funds would scale up the carbon offset ventures that already makeup a more than $2 billion carbon finance portfolio at the Bank.

Also under scrutiny: The World Banks dealing from both ends of the climate change deck. Between2005 and 2007 the Bank financed greenhouse gas-emitting fossil fuel projects (coal, oil and gas) to

the tune of $1.5 billion. At the same time the Bank acts as trustee to 10 greenhouse gas-reducingtrust funds, pocketing an average 13% overhead in the process. That puts the Banks s lice of the pieat just about $260 millionhalf of the money expected to accrue by 2012 in the under-resourcedUnited NationsAdaptation Fund,outlined during the recent international climate talks in Bali, to helpdeveloping countries cope with the unavoidable impacts of global climate shifts.

A close look at the Banks current carbon trading deals, which outsource the work of reducinggreenhouse gas emissions from industrialized countries to the global South where labor andtechnology are cheaper, reveals cause for concern. As I explain inWorld Bank: Climate Profiteer,areport released today by the Sustainable Energy and Economy Network at the Institute for PolicyStudies, the Bank is supporting some of the most polluting industries in Southern countries, whileadvancing little toward its goal of reach[ing] and benefit[ing] the poorest communities of thedeveloping world, in its carbon market work. And, its doing even less to promote clean, renewable

alternatives in the energy industry.

Toxic Bricks

Take theFaL-G Brick and Blocks projectin India. Through its Community Development Carbon Fund(CDCF) the Bank contracted to buy emissions reductions generated when 200 small brick-makersswitch from coal-fired bricks to self-hardening fly ash bricks. Sounds great for Indian entrepreneursand for the climate, right?

But waitfly ash bricks are made from the waste of some of the dirtiest industries in India. Besides flyash, which is a radioactive byproduct of coal-fired power plants laden with heavy metals, the bricksingredients include lime, a waste product of acetylene production, and gypsum, a byproduct that

fertilizer companies in India are under increasing pressure to dispose of safely. Under the Bankscarbon-trading program these companies pollution, which was once a liability, suddenly becomes an
http://www.carbonoffsetsdaily.com/category/india-carbonmarketnewshttp://www.carbonoffsetsdaily.com/category/india-carbonmarketnewshttp://unfccc.int/cooperation_and_support/financial_mechanism/items/3659.phphttp://unfccc.int/cooperation_and_support/financial_mechanism/items/3659.phphttp://unfccc.int/cooperation_and_support/financial_mechanism/items/3659.phphttp://www.ips-dc.org/reports/#292http://www.ips-dc.org/reports/#292http://www.ips-dc.org/reports/#292http://web.worldbank.org/external/projects/main?pagePK=64283627&piPK=73230&theSitePK=40941&menuPK=228424&Projectid=P090163http://web.worldbank.org/external/projects/main?pagePK=64283627&piPK=73230&theSitePK=40941&menuPK=228424&Projectid=P090163http://web.worldbank.org/external/projects/main?pagePK=64283627&piPK=73230&theSitePK=40941&menuPK=228424&Projectid=P090163http://web.worldbank.org/external/projects/main?pagePK=64283627&piPK=73230&theSitePK=40941&menuPK=228424&Projectid=P090163http://www.ips-dc.org/reports/#292http://unfccc.int/cooperation_and_support/financial_mechanism/items/3659.phphttp://www.carbonoffsetsdaily.com/category/india-carbonmarketnews


8/9

asset. New revenue streams opened up by World Bank carbon finance create perverse incentives,benefiting fossil fuel dependent power plants and factories.

What about the poor? Staff managing the CDCF implored citizen groups to understand that projectslike fly ash bricks help the poor by bringing jobs to rural India, and, by applying social safeguards,help keep kids out of the workforce. When asked about the health risks posed to workers who will

handle toxic chemicals, one Bank senior environmental specialist claimed not to have heard theseconcerns before. Is that an oversight or malign neglect?

Ultimately, the climate loses, too. Besides downplaying the serious health problems that fly ash cancause, the Bank also disregards the fact that the inputs for these bricks come from greenhouse gasemitting sources. The UN body that regulates North-South carbon trading requested the Bank includethese emissions in the projects carbon footprint, but the Bank declined to do so, responding that thiswas outside the boundaries of the projects scope.

Meager Emissions Cuts

Indeed, the World Banks carbon-offset deals have produced meager results for greenhouse

emissions cuts, a fact that has trust fund contributors scrambling for carbon credits before the firstKyoto Protocol commitment period expires in 2012. Donors that are worried about keeping theirpromises to reduce emissions have, with the help of the World Bank, shifted a portion of their moneyto low hanging fruit projects that yield cheap, easy and abundant emissions. But the bumper cropof cut-rate emissions reductions is undercutting the competitiveness of renewable energy and small-scale projects, which are already more expensive and pose higher investment risks.

The World Banks plan to use its existing carbon-offset portfolio as the model from which to scale upto a low carbon economy should sound alarms for anyone seriously concerned about avoidingclimate chaos. The Banks foray into the carbon market paves the way for business-as-usual, whileshort-changing clean, renewable energy, the poor, and ultimately the climate. The Bank, on the otherhand, stands to gain enormously.

Back in the windowless conference room in downtown D.C., one non-government organization staffermuttered under his breathe that the Banks idea of low carbon alternativesclean coal, largehydropower plants, landfill gas recoveryis unacceptable. The Bank representative wrapping up hisPowerPoint presentation responded, Its not your money.

But its not the Banks money, either. The money used for carbon deals, which the Bank issquandering on false solutions to climate change, is at least in part the money of Italian, Dutch,Spanish, and Danish tax payers. And the land and labor of people in the global South, who arestruggling for control over clean energy production and consumption, are being held by the Bank ascollateral.

Reform or Redirect?

For those with a stake in real solutions to climate change (i.e. everyone), the question becomes: whatare the alternatives to the current situation? Can the World Banks climate policies, if not theinstitution itself, be reformed enough to trust the Bank to lead the way to a renewable energy future?

A first step would have to include pulling out of financing fossil fuels completely (as recommended bythe BanksownExtractive Industries Reviewin 2004). As a second step, the World Bank would needto calculate the greenhouse gas footprint of all its public finance, and private investments that runthrough the public institution, and weigh the costs of climate change in deciding which projects tofund. And finally, donors should have the amount of greenhouse gases produced from projects theysupport debited against any emissions they hope to claim through offsetting.

For many, its clear that banking on the World Bank to solve the climate crisis is an exercise in self-destruction. Ultimately, the World Bank needs to halt its climate altering investments and get out of
http://www.edf.org/article.cfm?ContentID=3667http://www.edf.org/article.cfm?ContentID=3667http://www.edf.org/article.cfm?ContentID=3667http://www.edf.org/article.cfm?ContentID=3667


9/9

the carbon dealing business. The UN Framework Convention on Climate Change provides the besthope for transferring the resources needed for Southern countries to cope with the impendingconsequences of climate change, and encourage local control of energy production and consumptionnot the market. This is the institution that Northern and Southern governments must support ingenerating the political will and political space to transition to a truly low carbon, climate resilientfuture.

Janet Redman is a researcher at the Sustainable Energy and Economy Network, a project of theInstitute for Policy Studies,and author ofWorld Bank: Climate Profiteer,a report about the Bankscarbon-financing work.
http://ips-dc.org/http://ips-dc.org/http://www.ips-dc.org/reports/#292http://www.ips-dc.org/reports/#292http://www.ips-dc.org/reports/#292http://www.ips-dc.org/reports/#292http://ips-dc.org/

india to have new accounting norms for carbon trading

Documents