Strict cap by UN on HFC projects to impact company revenues
Companies, majority of them headquartered out of China and India, earning major chunk of their revenues through carbon credits through HFC 23 destruction projects, may face a fall in their revenues, due to a probe proposed by UN, after a consortium of North American and European activists demanded an investigation of such projects. These firms are alleged to have raised their production of the greenhouse gas HFC-23, a by-product of the coolant HCFC-22, to earn the CERs.
As per the Meth panel of UNFCCC the existing system of carbon credits can cause the incentives to increase baseline emissions through change in the production pattern of HCFC-22. In order to address this issue the panel has recommended caps on projects following the present system.
The panel has suggested a revised waste generation rate, reducing it radically to a range of 1% - 1.4% from 1.4%-4.0%. Most of the projects in India and abroad, have set a benchmark of 3% and with the implementation of suggested caps, carbon credits of Indian firms such as SRF, Gujarat Fluorochemicals Ltd, Chemplast Sanmar Ltd. and Navin Flourine International Ltd. are slated to bear a major brunt.
According to an analyst, if this limit is applied it would cut pre-2013 CER supply, estimated to be around 1.1-1.2 billion by 2012, by more than 10 percent and by 80 percent from HFC 23 projects alone. Credits generated through destruction of HFC 23 accounting for nearly half of all those in circulation, if not curbed, would threaten the success of the third phase of the EU ETS, which will run from 2013 through 2020, as they lower the carbon prices by their sheer volume.
Commenting upon the proposed investigation, Mr. Anmol Jaggi, Director, Gensol Consultants Pvt. Ltd. stated, “The panel has recommended reconsidering a cap for waste generation rate which determines how many credits these firms are eligible to earn. With the new indicated limit of about 1.4%, supply of CERs is going to fall drastically, as it would lead to a loss of over 130 million CERs before the end of 2012. The step is also expected to bring down the number of permits that the Indian companies could earn, by as much as 50 percent.”
About Gensol Consultants Pvt Ltd. (GCPL)
Gensol Consultants Pvt Ltd is a 360° Carbon Solution Provider with expertise in generation, registration and trading of carbon credits (CERs and VERs). GCPL’s key services include Carbon Advisory (under brand Gensol), Strategic consulting - Carbon footprinting and mitigation (under brand Green Karma) and Consultancy in Solar projects.
The company has a portfolio of more than 18 million credits and a clientele of 350+ companies across India - including organisations such as Mastek, Welspun, Zaveri & Co, Quippo, Bajaj Hindustan, etc and is also an empanelled consultant for Govt. of Himachal Pradesh.
