This has happened in the backdrop of European Commission's move to slash the levels of green house gas emissions that several European countries, including Germany, Sweden, Ireland and Greece, are allowed to emit.

The European Union has announced that these countries would now be allowed to emit less green house gases (by a total of almost 47 million tonnes of carbon dioxide on a per year basis).

This means that the demand for carbon credits is likely to go up.

"Following this, the minimum price that several Indian companies are getting per certified emission reduction (CER) has moved up to € 13.5-14 now from about € 12-12.5 in early November," said Mr Sudipta Das, Partner, Ernst and Young.

CERs are units of measuring carbon credits and each represents one tonne reduction of carbon dioxide.

"The prices for CERs from Indian projects slated for forward delivery are ruling in the € 9-11 range. But spot delivery of CERs from Indian projects are selling at a premium as they do not carry delivery risk," said Mr Robert Taylor, Director, Agrinergy.

This is because CERs from Indian projects enjoy the transferable factor.

Carbon credits from Indian projects are transferable across the two phases of the Kyoto Protocol (2005-07 and 2008-12).

This benefit is enjoyed by carbon credits emitted from projects undertaken in developing countries such as Sri Lanka, China and Brazil as well.

Carbon credits generated in 2005-07 from Indian projects can be used by European firms to offset their emissions even during 2008-12, said Mr Das.

However, carbon credits generated from European projects are not transferable across the two phases.

Thus, carbon credits delivered in 2005-07 from European projects cannot be used to offset emissions in the second phase (2008-12).