BUSINESS

‘Market size for carbon credits trading around $300 bn/year’

Mahua Acharya, MD and CEO, Convergence Energy Services (CESL), tells FE’s Anupam Chatterjee how the company’s LED programme has become particularly important after the COP 26 UN Climate Change Conference held in Glasgow in November 2021, where India made its 2070 net zero announcement. Edited excerpts:

The global carbon credit market is promising to become a significant source of funding for development projects across the world. However, the amount of money that can be tapped from this market currently depends on how “charismatic” the projects — for which funding is being raised — are. Mahua Acharya, MD and CEO, Convergence Energy Services (CESL), tells FE’s Anupam Chatterjee how the company’s LED programme has become particularly important after the COP 26 UN Climate Change Conference held in Glasgow in November 2021, where India made its 2070 net zero announcement. Edited excerpts:

How do you think the global carbon credit market is shaping up?

There is no one single market for carbon credits. While there are sovereign markets, there is also the voluntary market. We are using the voluntary market for now. Private companies have been preferring the voluntary market where prices of carbon credits vary significantly, from as low as 10 cents to $80 as pricing depends on various factors. The market size for carbon credits trading is around $300 billion per year, and this is set to become twice as large. The compliance market, though much larger as of now, is mostly restricted to internal transactions within EU nations.

How are these prices determined?

“Charismatic projects”, such as those which address poverty alleviation and enhance women’s empowerment, tend to fetch higher prices. Projects such as supplying three-wheeler electric vehicles, though they affect people’s lives and impact employments, have no specific guidelines for carbon credits. After Glasgow, along with India’s 2070 net zero announcement, CESL’s LED programme becomes particularly important.

What is the status of CESL’s LED distribution programme and how does it aim to gain from the global carbon trading market?

We charge Rs 10 for each LED bulb in exchange for an incandescent bulb. The price of the LED bulb we supply is around Rs 85, and there are other expenses of around Rs 15, taking the total cost to Rs 100. We have reached around 15 lakh by now, and the target is to distribute 1 crore LED lights by March. After it is done, the process to issue carbon credits for the programme would begin, and is expected to be completed by July. We are hoping to sell the credits in the market by August, where we are expecting a price of around $3-$3.5 per carbon credit.

Do you wish to take up such programmes all by yourself?

It would be great if state governments also actively participate in CESL’s programmes. Now, the capex of the programmes is borne by CESL. If state governments shared the capex, they can also gain from the earnings from carbon credits or simply invest in energy efficiency. We are planning to reach out to the states to show them clearly how the mechanism works.

How are things in the other areas where CESL is operating?

For our EV bus programme, where we are the demand aggregators, we have received orders from Hyderabad, Bengaluru, Delhi and Surat. We are also expecting orders from Chennai, Ahmedabad and Kolkata. We will also be extremely excited to get orders from Mumbai and Pune as well. Altogether, we expect to place orders for more than 5,000 EV buses.

For the EV three-wheeler programme, we have already closed the tender and have discovered prices which are 20-25% lower than the market rates. There are six finalists. The demand is a lot more than what we had expected earlier. We are currently speaking with financial entities and working out ways to fund the procurement.

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