With the existing global carbon market in chaos, there is an urgent need for China and India to take the lead in the renewable energy market.
he concept of carbon trading is an increasingly hot topic of conversation in boardrooms, summits, and industries all over the world. Carbon Markets or Carbon Trading (where the carbon market trades emissions under cap-and-trade schemes or with credits that pay for or offset GHG reductions) doesn’t just have economic implications. It affects everyone who is vunerable to the repercussions of greenhouse gas emissions and global warming. It is not a national issue, it’s an international one.
At the recent climate change summit in Doha, Qatar last month, there was a general consensus among world leaders that Europe and the USA were no longer leaders in the carbon market (owing to the global recession and Eurozone crisis, among other things) and that it was time for Asian powerhouses such as China and India to step up and take control.
The existing carbon market is based on the United Nations’ Kyoto Protocol or Clean Development Mechanism (CDM), which allows lesser developed countries to receive financial resources (in technical terms, obtain carbon credits) from developed nations to invest in cleaner and greener technologies. This means that at present, only developed countries are making compulsory emission cuts either locally or by paying developing countries to do them for cheaper.
But with China and India now standing as the world’s two largest holders of carbon credits, it makes more sense for these two countries to launch their own domestic carbon markets. Last year, global carbon credit trading was estimated at $5 billion, with India’s contribution alone at approximately $1 billion. India and China now have surplus credit to offer other developing countries that have a deficit, and are likely to emerge as the biggest sellers of carbon credits in the next decade, making Asia the new world power where carbon trading is concerned. This would also benefit local, rural industries who at present are unable to afford the high costs of carbon trading with European and American markets.
It won’t be a very difficult task, since the ground rules for carbon trading are already available. But what needs to be modified are factors such as high entry costs and prolonged approval times, which often drive investors away from carbon markets. With the existing system of trading nearing collapse, the time is right for Asia to step up to the game and lead a new expansion. If successful, the changes could be comparable to the nineties software boom in Asia.
For more on the future of carbon trading in Asia, read our interview tomorrow with Kishore Butani, owner of CARBONyatra in India, developor of India’s first Carbon Footprint Calculator.
