Beijing: India, a major carbon market, need to be price competitive or loose to aggressive countries like China or even African nations, industry experts said on Thursday.
India, which had a 43 per cent share in the supply of the Clean Development Mechanism (CDM) credit in 2004 compared to China's 5 per cent, yielded to the Communist giant in 2005 when New Delhi's share dwindled to just 3 per cent compared to China's 73 per cent, the World Bank said in a report.
However, India has 'rebounded' this year in the carbon market by gaining some lost ground, World Bank Senior Carbon Finance Specialist and co-author of the 'State of the Carbon Market Report 2006' report, Karan Capoor said.
In the first three quarters of 2006, India's share rose to 15 per cent while that of China slipped to 60 per cent, Capoor noted.
A senior official from REW Power AG, a German firm, Michael Fubi said that India lost out in 2005 as a result of excessive price demanded by Indian companies.
India's price range was "too high" at $15 to $16 for Certified Emission Reductions (CER), which forced European companies to look to China and countries in Africa which offered CERs at much cheaper prices, he said.
Indian projects lost significant market share in late 2005 and early 2006 as they waited for prices to keep rising, Capoor said.
Capoor noted that India and China have very different processes to manage their Designated National Authorities (DNAs), which position their countries in the carbon markets.
While both countries screen projects for sustainable development and technology transfer, China differentiates the treatment of projects on the basis of sectors and whether they promote development in priority regions, he said.
Both China and India also provide important information about approved projects and volumes publicly on the DNA website. In addition China identifies carbon credits buyers by name, he said.
China, which has approved 79 projects so far, only approves CDM projects that are either wholly Chinese-owned or have joint ventures that have majority Chinese-ownership.
The price of the CERs is fixed at the time of the submission for the Letter of Approval (LOA). The National Development and reform Commission (NDRC) exercises price control on the CERs to be in line with prevailing market prices in similar projects around the world.
There is no official fixed base price, although buyers report being aware of NDRC guidelines on price, the 'State of the Carbon Market Report 2006' says.
In contrast, the India National CDM Authority (NCA) does not limit issuance of letters of approval to Indian companies or majority-Indian companies.
The NCA does not get involved or influence CER price discussions or negotiations, which are strictly between buyer and seller.
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