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kulman
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Quote kulman Replybullet Topic: Carbon Credits: Hype or Hope?
    Posted: 17/Oct/2006 at 4:00pm
We all have seen how companies like SRF & Guj Fluoro have been rerated due to successful implementation of CDM (Clean Development Mechanism) & have got huge monetary benefit by trading Carbon Credits.
 
What are carbon credits?

Carbon credits are measured in units of certified emission reductions (CERs). Each CER is equivalent to one tonne of carbon dioxide reduction, and these can be traded.
Every tonne of reduction in greenhouse gases involves an investment of $300-400.

Global companies that have exceeded their emission levels can either cut them down by making the needed investments or buy carbon credits from developing countries. Trading takes place on two stock exchanges, the Chicago Climate Exchange and the European Climate Exchange. Trading can also take place in the open market. European countries and Japan are the major buyers of carbon credit.
 

Under the Kyoto Protocol to reduce greenhouse gas emissions, signed voluntarily by 150 countries - the US is a major exception - global companies that have exceeded their emission levels can either cut down emissions or buy carbon credits from developing countries.

To avail themselves of this extra stream of income, companies in developing countries like India have to make some technology changes that will result in a lowering of carbon emissions. Once this reduction is certified by organisations like Ernst & Young and EcoSecurities, the value of this credit is tradable at a premium.

 
One may read more at this DNA article
 
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Let's debate on the long-term sustainability of this activity as there seems to be lots of companies lined up to implement CDM projects & get the same certified by consultants like E&Y. Some names which I have heard are:
GMR Industries (not Infrastructure, but Sugar mfr)
ASAHI Glass
ITC (@ Bhadrachalam Paperboard unit)
LAKSHMI ENERGY & FOODS (earlier known as Lakshmi Overseas--rice & wheat processing)
 
I request other forum members to post their views/comments.
 
 
 
 
 
 
 


Edited by kulman - 17/Oct/2006 at 4:02pm
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omshivaya
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Quote omshivaya Replybullet Posted: 17/Oct/2006 at 4:16pm

Gujarat Fluro and Navin Fluro are going to good beneficiaries I hear. I however dont follow the CC scene fully.
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basant
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Quote basant Replybullet Posted: 17/Oct/2006 at 4:38pm
I am myself ignorant of this CC business except that I think that these things affect stock prices for one year/one time. After that since this is not a growing income stream the market would treat it like the fixed deposit income that the company earns on idle cash or rather give it  a low PE (non operating incomes always have low PE's) - but that is after that initial jump so my sense is that making that calculated move of being invested before the initial jump should only be helpful!
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Quote investor Replybullet Posted: 17/Oct/2006 at 4:41pm
SRF is another stock that used to go up on the carbon credit story
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Quote manishdave Replybullet Posted: 17/Oct/2006 at 10:14pm

IMO CC is good system for the world even though it will add cost to industry in general. It will encourage cleaner technology. I hope there is some fraud prevention and it is not "ACTUAL" thing, con artists find a way to "EARN" CC.

Wind Power/Hydro are gainers.
 
 
Basant,
It is not exaclty a fixed income for two reason.
1. CC Price fluctuates with demand/supply. IMO in long run price will go down with better technology.
2. Lets say it adds 2% in margin. If capacity of particular company doubles, it still adds 2% so there is growth too.
 
It makes significant difference for solar/wind power as they are competing with coal. Cost of coal power will go up and wind power will go down and and if wind is struggling for viability, they get more growth due to viability.
 
 
 
 
 
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Quote basant Replybullet Posted: 17/Oct/2006 at 10:21pm
Yes, that the current capacity going up shoukd increae the CC revenue also- considering similar efffciciency levels. I missed that one.But anywhere else in the world that CC companies created such noise/talk as they did in India that you might know of? 

Edited by basant - 17/Oct/2006 at 10:38pm
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manishdave
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Quote manishdave Replybullet Posted: 17/Oct/2006 at 12:15pm
But anywhere else in the world that CC companies created such noise/talk as they did in India that you might know of?
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Not really.
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kulman
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Quote kulman Replybullet Posted: 17/Oct/2006 at 12:34pm
According to EcoSecurities, Indian CER market would rise multifold by 2012. However, we must remember that it is their job to sell this concept & make projections so suitable discounting needs to be done.
 
For more info on this, download this interesting presentation.
 
 


Edited by kulman - 18/Oct/2006 at 7:30pm
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