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India Plans $16 Billion Energy-Saving Credit Market

By Natalie Obiko Pearson

(Bloomberg) — India, the world's fourth-largest polluter, plans to start a market to trade energy-saving credits that may reach 740 billion rupees ($16 billion) in five years as it seeks to curb emissions that cause global warming.

Businesses that exceed energy efficiency targets will be awarded credits that can be traded on power exchanges with companies that fail to meet the goals, Bureau of Energy Efficiency director-general Ajay Mathur said in an interview in Mumbai.

The exchange-traded system may help India meet its target of cutting carbon intensity, or the amount of carbon dioxide released per unit of gross domestic product, by as much as 25 percent from 2005 levels by 2020. Global initiatives to curb emissions were thwarted last month when 194 nations failed to agree on binding targets for reducing carbon dioxide.

"We'll start to see a lot more domestic and bilateral trading of this sort to pick up because as we've seen, it's incredibly difficult and time-consuming to implement a global, binding system," said Ishani Chattopadhyay, chief executive officer and founder of Arctic Holdings Ltd., a carbon management company with offices in New Delhi and Melbourne.

Australia has introduced energy savings certificates, known as white certificates, at the state level, Chattopadhyay said. The U.K., France, Italy and some U.S. states have started similar programs, according to the Washington, D.C.-based World Resources Institute, an environmental policy group.

Efficiency Targets

The government expects to set efficiency targets for companies by the end of March and is talking with Indian Energy Exchange Ltd. and Power Exchange India Ltd., the country's two power exchanges, to set up trading protocols, Mathur said.

The government unveiled a plan in April aimed at saving the equivalent of 23 million metric tons of oil by 2015 by encouraging power-intensive industries and businesses to reduce their consumption through energy efficiency measures.

The National Mission on Enhanced Energy Efficiency intends to avoid power capacity additions of 19,000 megawatts that would otherwise be needed to meet demand and also curb carbon dioxide emissions growth by 98 million tons annually, or 10 percent of the current discharge, according to power ministry estimates.

The government will reimburse as much as 50 percent of unpaid bank loans given to companies that seek to invest in energy efficiency projects, Mathur said in an interview at the venue of a conference.

"Banks are unwilling to lend to energy efficiency because it's not a business model they do," Mathur said. "To increase the comfort of financial institutions to lend for energy efficiency, we are creating a partial risk guarantee fund."

The energy efficiency bureau is talking to State Bank of India, the nation's biggest lender, HSBC Holdings Plc and PTC India Ltd. to provide loans for energy efficiency projects, he said.

To contact the reporter on this story: Natalie Obiko Pearson in Mumbai at

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