Mumbai: In a bid to tap the rapidly growing market for environment-based financial products, Enam Group, the Mumbai-based closely held financial boutique, has formed a joint venture with UK’s Sindicatum Carbon Capital International Ltd, a global developer of greenhouse gas (GHG) abatement projects.
This will help Enam, which offers equity brokerage, private equity, M&A, private banking and wealth managment services, to also offer investment banking services for carbon credit deals.
Ecosecurities India, Asia Carbon Ltd and Rabo India Finance offer similar services in India, but Enam will be the first domestic company to offer intermediary services in carbon credit deals.
Consultants such as Ernst & Young, Deloitte and PricewaterhouseCoopers offer services to Indian corporations for the validation process involved in obtaining credits.
“The market for carbon credit deals in India is estimated at around $6 billion (Rs23,640 crore) in the next four years,” said Vishal Kedia, head of emerging businesses at Enam. “About 34% of the number of new CDM (clean development mechanism) projects approved are from India. Globally, environmental finance as an asset-class is pegged at $1 trillion by 2012.”
A carbon credit, or certified emissions reductions (CER), licenses the owner to emit one tonne of carbon dioxide a year. CERs are awarded by the CDM executive board, an arm of the United Nations (UN), to projects in developing countries. CERs certify reduced GHG emissions because the international treaty, signed under UN’s Framework Convention on Climate Change (UNFCCC), has set quotas for such emissions.
European and Japanese companies are the major buyers of Indian CERs. “Now, with Australia ratifying the Kyoto Protocol, we are expecting strong demand from that region as well,” said Kedia.
The process of CER certification, in the case of a company, starts with a project plan to reduce its GHG emissions by investing in an alternative clean manufacturing process. This is where an external consultant comes into play. The validation adviser will help the firm make the project plan and submit it to the national CDM board. It then goes to the UN’s CDM executive board.
If the project plan meets the set parameters, there will be periodical plant visits from independent verification authorities, selected by the CDM board, to report actual reductions in emission.
Accordingly, the CDM board approves the project, and CERs are approved. CERs are then sold in the international markets. Enam plans to broker such deals and fund such projects.
“The price of CERs is now bound to rise with the international transaction log (ITL) in place,” said Kedia. ITL was awarded to the Kyoto Treaty by UNFCCC, recently, to help transfer the CDM registry to a national level.
“Currently, CERs are priced at around $17 (Rs670), while European Union allowances (EUAs) are selling at around $30. EUAs are the regional equivalents of CERs. This was because of the lack of transfer facility of Asian CERs to the national registry of a European buyer. As a result, European buyers were paying a higher price for locally available EUAs. This price difference between CERs and EUAs will now reduce, offering deals to Indian players,” Kedia added.