Interview: Way forward for Indian carbon economy

Nakul Zaveri , Senior Investment Officer, Climate Change Capital talks about recent and futuristic carbon market, carbon finance and Clean Development Mechanism activities with Indian perspective.

Nakul Zaveri has extensive experience in project creation and implementation in various sectors of CDM. He also has intensive experience in the Financial Services Industry and was an integral part of various start-ups and provided them with strategic outlook. Currently he is with a leading carbon market player in the world “Climate Change Capital”, where he brought into the organization several innovations in carbon transactions, specifically in the pricing and deal structure.

Can you tell us about Climate Change Capital and its operations in India? What kind and scale of projects is CCC planning to invest in India in 2010?

Climate change capital is basically an investment manager, based in London. We essentially invest into companies, which have a speciality in creating opportunities that are transiting towards low carbon economy.  One of the carbon funds is a 750 million Euros fund. Then we have green building fund and the energy infrastructure fund.

Essentially in India we look at opportunities with carbon assets, which apart from Wind energy include municipal solid waste. These projects normally would have some sort of carbon assets or would be generating some carbon assets - until now we have had exposure in about four different companies and 415 projects in India. Most of these are in municipal Solid waste sector where basically carbon credit is generated for abatement of methane.

How important do you think is foreign investment to India’s economic growth?

I think it’s quiet important. Any sort of investment, be it local or international, is equally important right now and given the nature of the market, specifically in terms of global policies, I think it is very relevant also and important in terms of investment in climate change. As for global warming, at the end of the day entire human race is at risk not any particular region or country, so we have to cooperate on all fronts and finance is clearly a primary requirement.

Did the economic crisis of 2009 hamper the investment scenario in India and how does it look in 2010?

I think most of the news that we are hearing is that the worst is behind us. We have also seen that significant progress has been shown by Indian companies. Investment trends are also rising since meltdown. So we are very hopeful and positive that 2010 will be much better than the previous year.

India has been the second largest source of CDM projects, yet a lot of people are not convinced with the CDM approach, what is your opinion on this?

I think it is important to put this in perspective – i.e. whether the country is second largest in terms of the margin or whether this is purely in terms of volume and value.

I think there is not enough awareness in the markets. You know as people perceive this, based on various factors, as highly dynamic and risky commodities, they keep on moving on extremes. Hence it is important for people to start monetizing these credits in various stages forward to ensure that true value of carbon assets is captured.

Do you think Carbon Cap and Trade is the best solution to keep us on track to expand Alternative Energy solutions in the future?

Yes it is one of the solutions. I think its one of the plausible solutions which have worked until now. Markets worldwide have accepted it in a certain manner and it has clearly got the required level of awareness. The need of the present hour is to bring interventions on commercial aspects and policy aspects and bring market mechanism to address rising concerns over Climate change effectively.

In your opinion, what would be the likely future of voluntary carbon markets in India?

From Indian perspective voluntary markets are lagging behind despite the markets being in existence for last couple of years. However the markets are based on policies, on international agreements. The fact is that until and unless the process is transparent and the regulatory body is credible enough, for a prospective country these goals are difficult to achieve.

Also if there is no compliance orientation most of these things are difficult to realize. These are the perils of voluntary carbon markets and that is why we have not seen too many transactions patterns in 2009 and so far even 2010 has not proved any better for this segment.

In view of the National Action Plan on Climate Change, which are the main sectors in which investment opportunities would leapfrog in 2010 in the country?

I think there is quite good scope for solar. Also there is significant advancement among other renewable energy sectors like wind, Biomass, Hydro, Tidal etc. Also laudable steps have been taken on green buildings and other sustainable materials front.

So I foresee investments in 8 – 10 different sectors over the next three years. As you can see main emphasis of Indian government is currently solar because unlike biomass, water and other which are established assets solar is currently nascent and has large potential and expected to further scale-up with upcoming technologies.

What do you expect out of the COP meeting in Cancun at the end of this year?

We are hopeful for a lot of things. The realistic expectation is that some clear signal or some binding agreement is executed between the countries. Without that, debates will continue and we will remain focussed on that front while losing our focus on the problems of climate change over which these debates originates. So let’s see, how the various countries work towards establishing a firm agreement.

This interview was conducted by Akhil Choudhary, a Masters student with TERI University.

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Karen Eliot