Posted by: BHANDARI SUSHIL on: February 15, 2009
World economy has been witnessed a great change on its course of expansion. It is a matter of dynamism to give color to the economy. Service market tends to lead the production sector. A newly emerged service sector i.e. Carbon business marked a significant entry in the economy. It is the new trading approach in the traditional regime of goods and services industry. Environment consciousness resulted out in the quantification of the global benefits rendered by the local conservational efforts. ‘Think globally, act locally,’ boast up the trade and is expected to catch the pace of the ongoing trend continuously.
Carbon trade volume continues to soar up to leave a distinct mark in the economy. Its volume accounted to 374 million metric tones carbon dioxide equivalent (tCO2 e) in the year 2005. This figure itself represents the increment by 240% to that of the previous year. 78 million tones equivalent was enlisted as figure of carbon trade volume in the year 2003 which was followed by the inclined volume by 41% in the next year. According to the World Bank, the monetary equivalent of the transaction raised out to be encouraging. In the last year, the trade was able to made transaction of 64 billion U.S. dollar. It was 30 billion and 11 billion in the year 2006 and 2005 respectively.
The sector is expected to peak up the market share in the days to come. The inclusion of the most debated issue of Reduced Emission through Deforestation and Forest Degradation (REDD) has widen the sphere of the trade arena. Clean Development Mechanism (CDM) and Joint Implementation (JI) mechanism under the trading regime were highly geocentric. The volume of the trade through project based approaches was limited to certain specific centre with the justification of economies of scale. China, the most lucrative spot as envisaged by the trading institutions such as brokers, alone able to attracts 61% of the total volume in the recent years. India, another booming economy was able to share the volume by 12% of the global CDM market.
Carbon trade market is observed to attain the steady increment of its volume of the transaction. It is probably the only a market with such huge increment of its market volume in the short span of time even in the initial stage of its entry in the market. It is viewed to gain its momentum basically due to the two reasons. Firstly, it is the mechanism to save the ‘green image’ of a corporation. Environment friendly image acts as credentials of a corporation and attracts the sympathetic costumers. Corporate Social Responsibility (CRS) is taken as a bench mark of a company as a responsive actor. Helping to console the damage done by its by-products on the ‘global commons’ through incentives to carbon sequestration activities in another place, definitely leads towards the dual ends. Secondly, it is mandatory to reduce the emission to combat climate change. Proper institutional arrangement can help to obtain distributive justice and transfer the benefits to wider populace.
REDD, a new innovate mechanism under the carbon trade, explores the potentiality of the Nepalese forest. The community forest of Nepal can be compensated for the conservation activities which benefits the global environment. The carbon abatement services can strengthen the polluters Pay principle and the Paying for Environment Services (PES) concept emerging in the resource depleting world.
Finance Minister of Nepal has rightly marked the need of economy of Nepal. It should gain a concrete positive momentum and the trend of clumsy snake crawl should be kept as past events in the history. It has no time of crawl but to leap like a frog to catch the train of the ever expanding world’s economy. But, easily said than done, the days are not as easy as we expect. The aspiration and issue come to halt on its way at the ground reality of resource constraint. According to a research carried out by the author, the potentiality of the Nepalese forest to harvest revenue from carbon trade is huge. It has avenues such as CDM and the REDD to attract significant revenue from the globe. Forest sector can attract NRs 11 billion annually at the rate of U.S. $ 12 per CO2 sequestration per year even if half of the total forest is recognized for the transaction .The share can be as large as 18.4 billion at the rate of U.S. $ 20. In the same way, a huge chunk of foreign transfer payments can be drawn by the sectors such as bio-gas, improved stoves and water-powered mills, and micro-hydro projects.
Carbon market is ever blooming. The supply shortfall far below the demand is a common phenomenon in the sector from its inception phase. Many multinational corporations (MNCs) allies towards creating pressure to formulate concrete working mechanism under the mandatory mechanism such as the Kyoto Protocol. About 150 such World leading business entities have raised common voice towards the establishment of clear, transparent, and consistent price signals through creation of long term policy framework. It ensures the entry to the niche market through establishment of secure market nature.
Environment consciousness leading towards the mandatory regulation mechanism framework certainly fuel up the market expansion. The ongoing trend of supply shortfall over the demand clearly marks the widening scope of its expansion. The CRS and the pressure towards shifting of present pollution laden economy to ‘green economy’ create conducive environment towards the significant market dominance of carbon trade in the days to come.
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