The recession and falling prices of U.N.-backed carbon credits are changing the way carbon deals are structured in India, one of the largest sources for carbon offsets trading. Project developers and consultants say that with the changed market dynamics, more players are seeking partners to spread financial risks.
Until some months back, many companies that could sell their credits usually hung on to the credits hoping for higher prices.
But with prices of certified emissions reductions (CERs) falling and the number of credit buyers and investors declining, project developers are looking to find partners, such as utilities in rich nations or investment banks. The traditional Indian model was to develop the project themselves, get it registered and sell it on the spot market. Now, there’s more interest in forward deals.
Under the CDM, governments and companies in rich nations can invest in clean-energy projects such as wind farms and small hydro plants and earn CERs in return to meet emissions reduction targets or to sell for profit.
The prices of CERs are trading around CERs traded around 12.50 euros ($17.50), down from about $30 last year.
According to some experts, some developers are looking to get the CDM costs funded through the buyer and then try to do a forward transaction.
According to U.N. data, India had 1,233 CDM projects as of July 1 2009. A third were biomass projects and nearly 40 percent were wind farms. China, the #1 country for these projects, had 1,759 projects with hydro comprising 50 percent of projects and 22 percent for wind.
Project developers say the market is also weighed down by concerns over the shape of the CDM after 2012. The scheme is part of the Kyoto Protocol, whose first phase ends in 2012.
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