Green Credit

The Telecom Regulatory Authority of India's proposal to give green points to
cellular operators has been buried under the dust of time without much action.
But some of the major players have identified the procedures of carbon trading
and the benefits it entails. Some are even minting good profits from it.

The concept of carbon trading arrived in India in 2002, and since then India
has developed an attractive CDM portfolio with a market share close to 12%.

The Kyoto Protocol, 1997, urges all countries to reduce their greenhouse gas
emissions by 5% from their 1990 levels by 2012, or pay a price. A carbon credit
refers to one tonne of carbon dioxide emissions avoided by the adoption of a
certain practice when compared with a business—as-usual (baseline) scenario; it
can be sold on the carbon market to a company in the developed world looking to
offset excess emissions.

The World Bank has built itself a role in this market as a referee, broker
and macro-manager of international fund flows. The scheme was entitled Clean
Development Mechanism (CDM)-or 'carbon trading'-in 2000. The bank subsequently
handed over $10 mn to India's Infrastructure Development Finance Company to fund
clean projects that would generate saleable carbon credits.

The Government of India announced its National Action Plan on Climate Change
in July 2008, reinforcing the need of climate change mitigation and adaptation
actions. India has been strengthening its position in the credit exchange
market. The Indian CDM project portfolio has grown exponentially, from 297
projects in April 2006 to 753 projects in September 2007 to 1,114 projects in
2007, with over 536 mn carbon credit potential up to 2012. Indian revenues are
expected to grow by $10 bn by 2012. Out of the 806 projects registered India
bags nearly 35.7%. The consultants say that the best should be done before the
carbon market closes. There is growing demand from the Indian industry to extend
the 2012 deadline.

Telcos in the Carbon Market

Carbon credits consultants say awareness among telcos on carbon trading is
very much in place. It would be naive to assume that the players in the telecom
sector have not heard of carbon trading and the procedures, and the benefits it
entails.

Last year, State Bank of India had disclosed its plans to create financial
instruments to aid carbon credit trading and management and fund and advise
clients in the eco-friendly business. The country's oldest bank had said it had
signed a Memorandum of Understanding (MoU) with Eco Securities India , MITCON
Consultancy Services and Cantor CO2E India to jointly provide one-stop solutions
to industries for CDM projects and emissions trade.

In a bid to promote environment-friendly telecom infrastructure, the Telecom
Regulatory Authority of India proposed to give carbon credits to operators for
using eco-friendly fuels to power their exchanges and mobile base stations in
2006. Around the same time, the Cellular Operators Association of India engaged
the R&D of ACME to conduct research and pilots on using hydrogen-based cells to
power mobile base stations.

The regulator had suggested giving financial incentives in terms of lower
revenue share to operators deploying non-conventional sources of energy such as
solar and wind energy wherever possible, as the operational cost to provide
backup power supply in case regular electric supply is erratic, is very high.
Moreover, since the use of generators for long hours results in pollution, there
is a need to encourage use of non-conventional sources of energy. If a service
provider uses, say, solar energy to energize base stations, the company may be
considered for certain incentives. Taking a cue from similar concepts being used
internationally to reduce pollution, Trai had calculated the incentives but
thereafter there is no update on the proposal.

In the same year, Bharti Airtel and ACME Tele Power that provides energy
management solutions, entered a joint venture for carbon credits. Selling the
carbon credits obtained by the sites jointly run by the two companies has been
generating revenue ever since. Sources in the industry say, 50% of Airtel's
profits from credits sale were to go to ACME.

Reports show in 2006 that ACME presented a carbon credit mandate of $30- $40
mn to the Ministry of Environment & Forests. By saving energy of 2 kW per hour
at each site, 1.6 kg of carbon per hour is being saved.

An ACME official says, “With over 60,000 sites of telecom operates using this
technology, more than 8,40,960 tonnes of carbon is being saved each year.
Credits that can be earned from this can be easily calculated.”

“Tata Teleservices and Reliance Communications have smaller shares since the
requirement of CDMA sites is lower than that of GSM sites. The company is
studying similar proposals from Idea Cellular and Vodafone,” the official says.

Also Nokia Siemens Networks is in global collaboration with ACME TelePower to
provide energy efficient radio cell site solutions to telecom operators. So,
there is a lot of incentive to cash in by means of green initiatives.

“Critical mass adoption of green communications will occur between 2008 and
2012 during the first phase of the Kyoto Protocol Treaty period. Within five
years, green communications solutions will become part of the normal course of
business, automatically including the reporting, monitoring, tracking, and
trading of carbon credits on various interconnected carbon exchanges. This
emerging trend is already apparent in the current market,” says Vivek Dhariwal,
a consultant from Emergent Ventures.

“If telecom carriers do not deploy solutions sets incorporating environmental
branding, then power utilities will. Once green communications product branding
and service sets are offered by the first movers, be they power utility or
carrier, the acquisition cost per subscriber for other service providers will
increase,” says Dhariwal of Emergent Ventures.

Investments for Credits

The telecom players are now investing in a host of telecom products that are
increasingly contributing towards both building a greener tomorrow and helping
the country's economy, while showing its customers that being
environment-friendly is profitable. The energy solutions companies are
innovating on technologies that can reduce Green House Gas emissions
drastically, in process making the unit or the project eligible for carbon
credits in large volumes.

Sudipta Das, National Leader, Climate Change & Sustainability Services, Ernst & Young agrees the telcos are increasingly
becoming active in their investments to go green. “There are big names in the
telecom industry who are looking at carbon trading as a green pasture, but there
are some new ones who are yet to rollout there services in some 3-4 months time.
For them carbon trading is a premature concept.”

A recent analysis indicates that India is likely to derive over $800 mn a
year from CDM. Growing at a rate of 4% per year, India's greenhouse gas emitting
companies contribute almost 3% of the world's total emissions. Therefore, the
country is seen as one of the most attractive destinations for CDM-linked
investments. Estimates put the cumulative foreign direct investment on account
of such projects at about $2 bn, growing at the rate of $200 per year. However,
there are no figures available to show the share of telecom players in this
business.

According to a FICCI research paper published recently, although India holds
more than 25% of the $64 bn carbon trade, brokers purchased more than 40% of the
transactions in 2007 bfor higher future prices. The Government of India too is
skeptical about the efficacy of CDM as there is no clarity on what after the
deadline ends. Even the FICCI paper said that post 2012 uncertainty 'hung like a
dark plume' over the carbon markets.

The Ministry of Science & Technology wants that the country should not make
profits alone but also get access to newer technologies.

In spite of the prevalent uncertainty, consultants says the future for CDM is
bright. Dhariwal says with the government launching NMEEE (National Mission on
Enhanced Energy Efficiency) under NAPCC (National Action Plan on Climate
Change), it will involve domestic trading scheme for energy efficiency
certificate. And energy is directly linked to carbon, which is a good sign.

Recently, Australia has provided a white paper on their Cap and Trade system
to be launched in 2010, in which their companies can buy as much CERs to achieve
their targets.

“With the US president-elect Barack Obama giving signal of US intentions on
possible future climate change regulations in the country, the future of this
business is bright. Yes there are challenges in terms of the current financial
turmoil we are experiencing globally which may dampen the investments for the
time being. But as we pass this financial crisis we will be heading towards
solid carbon trading opportunities in India and the World and telecom players
can undoubtedly be party to it,” added Dhariwal.

Heena Jhingan

heenaj@cybermedia.co.in