Maruti plans to roll into carbon credit trade

Maruti Suzuki is the latest auto major in the country preparing for trading in carbon credits.

"We are examining the issue," a company executive at India's largest car manufacturer said, while declining to specify which environment-friendly manufacturing processes at the company's two plants in Gurgaon and Manesar would help it generate the credits.

Tata Motors - the largest vehicle manufacturing company by sales revenue - is another vehicle manufacturer which has been trading carbon credits, or carbon emission reductions, since 2007.

Currently, a handful of vehicle and auto parts manufacturers are involved in CER trading. In addition to Tata Motors, Bharat Forge, Bajaj Finserv and Apollo Tyres have been actively monetising their CERs. The total CERs generated so far by the domestic auto industry is about 377,000 units, with an estimated value of Rs 18.5 crore (Rs 185 million).

A company generates CERs by implementing environment-friendly manufacturing processes that cuts the emission of greenhouse gases at the factory. "These measures are designed to cut emission of gases like CO2, reduce consumption of energy, promote waste heat recovery, use renewable energy, implement effluent treatment systems at the factory," Dipankar Ghosh, partner, Ernst & Young, said.

In return for all these efforts, companies like Maruti get one carbon emission receipt, which is equal to not generating one tonne of carbon gas. One CER currently costs around euro 23 (Rs 1,572) and is expected to touch euro 37 (Rs 2,529) by 2012. Each credit could be auctioned to a polluting company, based either in the US or in the European Union, which needs these credits to comply with the stiff carbon emission limits that are prevalent in these regions.

Domestic automobile companies, including auto parts manufacturers, have earned carbon emission receipts primarily on the shop floor and by erecting windmills. "Inside the factory, auto companies could cut down carbon emissions by reduced usage of electricity and fuel in all of their operations," Ghosh said.

Apollo Tyres, for instance, uses waste heat generated inside its production plant in Baroda for other manufacturing activities, thereby cutting usage of electricity. This qualifies the company for CERs.

"In addition, we use waste steam generated by our neighbour, Gas Authority of India, for our manufacturing process. For this, we hope to claim carbon emission credits in the future," Sunam Sarkar, CFO, Apollo Tyres Ltd, said. In 2006, the company sold about 39,000 units of CERs for Rs 3 crore (Rs 30 million).

The second largest forgings company in the world, Bharat Forge, minimises the usage of electricity by re-using heat generated in its forging plants. "We have invested in other green technologies that will help us to reduce our carbon footprint on the planet. As a global organisation, we are deeply committed to sustainability," says Amit Kalyani, executive director.

Every year, Bharat Forge and its subsidiary, BF Utilities, that operates windmills, generate about 35,000 units of CERs. For the financial year 2008–09 the company earned Rs 50 lakh (Rs 5 million) by trading its CERs.

Tata Motors generated 1.67 lakh CERs between 2001–2007, primarily derived from its windmill projects in Maharashtra, which earned the company Rs 14.45 crore (Rs 144 million) in the financial year 2007-08. A spokesperson said the company was waiting for international carbon credit prices to firm up before it could auction its CERs.

Pune-based Bajaj Auto, through its subsidiary, Bajaj Finserv, that operates 138 windmills in Mahrashtra, earned 100,000 units of CERs for 2008–09.For every megawatt of electricity provided through a windmill, a company earns between 2,000 and 3,000 units of CERs.