We’ve all read about global warming and climate change and some of us are debating what comes next after the Kyoto Protocol while pointing fingers at the political bullying by those leading the fuel- guzzling West. But most people ask “what does it have to do with us?” even as school books and management programmes now refer to carbon markets and carbon credits. The answer is, “It gives us the power to take change into our own hands.”
Consider the Voluntary Carbon Market, a mechanism which allows companies, non-governmental organizations, local governments and individuals to compensate for the pollution they cause. Every time you switch on a light, or travel by road or air, you release greenhouse gases (GHGs) that add to global warming. For example, by flying from Delhi to Mumbai, you will emit 0.13 tonne of carbon dioxide which you could neutralize by paying around Rs90. If you travel 5,000km a year in your petrol-driven car, you will emit a little less than 1 tonne of carbon dioxide which you can offset for around Rs800 — a small price for a year’s pollution.
When you pay for offsetting your emissions, you fund a project that reduces GHG emissions — most likely in India or China. These projects generate “credits” that are verified and/or certified by a standards organization which guarantees that emissions have indeed been reduced. The projects include energy-efficiency schemes, reforestation or afforestation programmes, industrial gas capturing plants, methane flaring plants, etc. This creates a trading market where the commodity is “reduced GHG emissions”, and the quality is measured by verification norms and the sustainable development occurring from the project. While this is a voluntary mechanism, the Kyoto Protocol provides for emission reductions via other regulated markets. The difference is that private organizations can offset a part or all of GHG emissions generated from their activities as part of their corporate social responsibility programmes or for building a “green image”, etc.
Some leading Indian firms have begun to take matters seriously. Among these are ONGC, ITC, Nestle, Essar Oil, Tata Steel, Wipro, JSW Steel, IDBI Bank, ICICI Bank and Rabobank. They have announced plans for emissions trading. It is comforting to know that several high-impact sector firms (in electricity generation, electrical equipment, construction) have taken the initiative to collect emissions data and allot upper-level management staff to climate change issues. But most firms need to overcome their tendency of short-term thinking and focus more on deep-rooted institutional changes.
The ministry of environment and forests estimates that GHG emissions in India in 2020 will be close to 3,000 million tonnes of carbon dioxide equivalent (mtCO2e) while the Institute of Economic Growth in Delhi estimates a rough population size of 1.3 billion by then, so we are looking at 2.3tCO2e per capita — while the US emits almost 15 times this amount. But most major US firms are actively involved in reducing their GHG emissions. City and state-level initiatives such as the Chicago Climate Exchange and New South Wales Greenhouse Gas Abatement Scheme (in Australia) have created market systems for this too.
Indian firms will face increasing pressure to comply with international environmental standards from their global partners. Tesco, an international grocery and general merchandising retail chain, recently said it will provide on the packaging details of emissions throughout the life cycle of each product it sells. So not only will the smallest of Indian suppliers to Tesco have to disclose emissions data, but they may also need to reduce these to sustain their business. And global competitors would be keen to adopt Tesco’s approach.
Those who want to know more can look up carbonfreezone.com, carbonyatra.com and climatefriendly.com— voluntary mechanisms facilitating emissions trade in India.
Sushil Kumar is chairman of the Centre for Food and Agri Business at the Indian Institute of Management, Lucknow, and Deepanshi Chaudhary is an intern there. Comment at email@example.com