Carbon credit markets are one of the most effective drivers of reducing emissions, offering the lowest-cost emission reductions and empowering India to prevent a loss of $35 trillion due to unmitigated climate change over the next 50 years.

Disclaimer: The views expressed in this article are those of the author and do not necessarily reflect the views of the Economic Times – ET Edge Insights, its management, or its members

Carbon credit markets are one of the most effective drivers of reducing emissions, offering the lowest-cost emission reductions and empowering India to prevent a loss of $35 trillion due to unmitigated climate change over the next 50 years.

Let us understand what we mean by carbon credits. In our view, it is one of the most efficient ways of financing a non-viable project, not from the economic sense and the most viable project from a humanity and climate-change sense. This is how carbon credit became popular, states Mahendra Singhi, MD & CEO, Dalmia Cement (Bharat) Ltd as he addresses the cement industry’s commitment to reducing carbon footprints at the 4th Edition of The Economic Times SDG Summit 2022

There are several projects in India and some of the developing countries, where carbon credits were utilized. Due to implementation of these carbon credits, which were sold between the range of $5 to $25, the companies could transform unfeasible projects into viable ventures.

Outlining the foremost carbon reduction project in the sector, Mahendra Singhi asserts, “I was fortunate to have worked in a company and to have developed a project in the cement sector that was first-of-its-kind in the global cement industry. Between 2008-2011, thanks to this project, we could reduce CO2 emissions, use powerplant waste i.e. fly ash, conserve critical minerals like limestone, bring down the amount of energy consumed, and at the same time. It became a viable project for carbon credit which added Rs. 45 crores to the company’s revenue.”

What is Carbon Market

Emission reductions and eliminations are transformed into tradable assets through a carbon market. This indicates that an industrial unit that exceeds the emission criteria is qualified to obtain credits. Furthermore, it would allow stressed units to purchase credits and validate compliance.

There are several projects in India and some of the developing countries, where carbon credits were utilized. Due to implementation of these carbon credits, which were sold between the range of $5 to $25, the companies could transform unfeasible projects into viable ventures.

India’s cement industry aims for CO2 reduction

Cement is responsible for around 7 percent of global carbon emissions. India is the second-largest cement producer and consumer, second to China. It accounts for over 8 percent of the global installed capacity which is only anticipated to grow.

As per the RBI report, government schemes such as the National Infrastructure Pipeline, Pradhan Mantri Awas Yojana, and the SMART cities mission are expected to push up the demand for cement.

The report highlights the need to align India’s economic goal with its climate commitments by implementing emerging green tech solutions. A significant amount of CO2 emissions in cement-making result from calcination, while the rest comes from burning coal and other fossil fuels.

One of the goals is to ensure that state-owned energy firms as well as cement and steel companies, can benefit from planned investments in carbon capture projects, opines Singhi.

Establishing an international carbon market environment

Mahendra Singhi believes “The carbon market has become a viable way of financing a project. Due to the delay in the adoption of the Kyoto Protocol by the United Nations Framework Convention on Climate Change (UNFCCC), there is a gap of around 8-9 years, in which we could not create projects for carbon credit.”

The good part was in 2015 when the Paris Agreement was signed, Article 6 of the pact mentioned that it was decided that the global economies should develop international carbon markets, but it could be materialized due to unexpected reasons.

Today, it is possible that in COP27 Egypt, the international carbon market will see the light of day and that would again enable the companies and countries to create such projects aimed at reducing CO2 emissions.

In India, we have a history of developing such projects. There is a limited market for carbon credit due to non-compulsion to bring down carbon emissions but at the same time, if we look at the global level, we would find a huge market for carbon credit, especially in the USA, and Europe.

So, the voluntary carbon market may serve the purpose when international carbon markets come into place, along with the formulation of appropriate laws governing the corporates to bring down emissions.

Cement manufacturing giant’s point of view

Speaking about how important voluntary carbon market development is for the company, Mahendra Singhi said “From the Dalmia Cement (Bharat) Ltd point of view, I would highlight that we were aware that this development is imminent. Considering the same, we have already worked on bringing down CO2 emissions below 500 kg level, less than the globally accepted emission reduction levels.”

In 2018, we were the first company globally to come out with Carbon-Negative Roadmap for 2040. We identified certain levers by which the CO2 emissions can be bought down. With the international carbon market getting activated, these levers can be eligible for carbon credits.

The journey towards carbon reduction:

Dalmia Cement (Bharat) Ltd. is the first heavy-industry sector company globally to announce a 2040 carbon-negative commitment in 2018 we were the first company globally to come out with Carbon-Negative Roadmap for 2040. We identified certain levers by which the CO2 emissions can be bought down. With the international carbon market getting activated, these levers can be eligible for carbon credits. So, the projects which look unviable today, for example, Carbon capture, utilization, and storage (CCUS) will become viable as per Asian Development Bank (ADB) estimates, if carbon credit can be sold at EURO 86. We are quite hopeful, as, in Europe, the prices of carbon credit may be ranging between EUR0 15-150, while in some places in the US, $300 is the price paid for Direct air capture (DAC), he affirms.

The company along with its stakeholders is working towards the realization of the carbon negative roadmap with specific reference to the scalable deployment of deep decarbonization technologies such as 100 percent renewable electricity, energy efficiency improvements, and Carbon Capture and Utilization (CCU) in a just transition approach.

The point is, yes carbon credit will play an important role in India as well as globally. We must prepare ourselves to extract this value, he added.

Authored by: Moulin Oza

Edited by:  Queenie Nair

Disclaimer: The views expressed in this article are those of the author and do not necessarily reflect the views of the Economic Times – ET Edge Insights, its management, or its members