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GROWING concern about the biosphere and increasing awareness of the need for pollution control have given rise to the concept of `carbon credit'. The system is simple. Companies that are involved in any activity which helps reduce the carbon content of air, such as industries manufacturing energy-saving devices or setting up waste-processing systems, are given `credits'. These can be used by other companies which emit carbon beyond a certain extent to avoid being penalised for the damage they cause to the atmosphere.

Though the concept was suggested by the US in 1997, at the Kyoto Conference, it has only just started gaining momentum in India, especially in the light of large number of windmills functioning in the country. However, the UK and Denmark are far ahead in implementing the trade and are closely followed by Australia, Netherlands and New Zealand.

The `Kyoto Protocol' was drafted in November 1997 to give a full and final shape to the scheme and to draft a policy framework based on it. The ICC (International Carbon Credit Committee) is now working on this with various governments, businesses, investors and members of the public in Australia, Japan and other countries to investigate the proposed schemes, quantify them and assess their `credibility'.

While the volume of carbon-dioxide emissions by the units can be measured fairly easily, discussions are now going on at different levels with various experts on how to determine the extent of their contribution in reducing or absorbing the carbon content in the atmosphere.

Certainly, once the Kyoto Conference proposals are finalised and given effect, strict obligations on businesses and countries for reduction of carbon dioxide emissions will be enforced and will also result in the establishment of a global carbon-trading market. Once brought into force it will undoubtedly have a direct impact on a country's forex rates as also its wealth.

Despite all the research, carbon credit cannot be a standardised system as it is basically a policy-created commodity. But it would allow for a great deal of policy and project level experimentation over the next few years until the various systems converge on some accepted modalities.

It is expected that it will be the electricity companies, on the one (selling) side, and the cement companies, on the other (purchasing) side, to first explore the market.

Some of the companies or projects that could benefit from carbon credits are: Renewable energy; biomass; hydropower; geothermal; wind and solar energy; co-generation; fuel switch; waste processing; landfill gas extraction; biogas applications; afforestation/reforestation, and so on.

Carbon credit is thus expected to redefine global trade and may bring about a drastic change in the ratings of various countries in the global market in the near future.

M. Gowthaman

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