Cement, Energy and Environment

• Chinese projects must have a buyer and a seller before any investment can proceed meaning the CERs are generally pre-sold before formal registration. Demand for Indian CERs • According to the NGO Sandbag which monitors the EU em1ss1ons trading scheme, 21.4 per cent of the 77.9 million CERs for 2009 EU ETS compliance came from India. This was down from 31 per cent (25.3 million) of the 81.5 million CERs surrendered in 2008. The vast majority were CERs. from Indian HFC-23 projects. Major concerns for investors • COM is a key part of the UN's Kyoto Protocol climate pact and nations have yet to agree on the shape of a successor treaty to Kyoto after its first phase ends in 2012. • While it is generally believed COM will continue in some form after 2012, the exact rules are unclear and it is unlikely all CERs will be accepted in the EU ETS or other national emissions trading schemes. • UN is under pressure to ban HFC-23 projects of sharply discount the number of CERs issued from them. A flood of cheap CERs from HFC- 23s has dominated COM to date and any tightening of the rules could slash the number of CERs available to buyers. Courtesy: The Business Standard, June 23, 2010, P3 YOU WOULD BEITER PAY TAX ON EARNINGS FROM CARBON CREDIT Corporate earnings from trading in certified emission reduction or carbon credits has caught the eyes of income tax department. Tax authorities plan to closely look at companies found active in carbon trading after finding non– payment of taxes on such earnings. The issue was flagged at the recent conference of the chief commissioners and director generals of income tax, a department official said. A scrutiny of data filed by a number of listed companies revealed that many of them were not including proceeds from the sale of carbon credits in their income while calculating income tax liability. Field officers are expected to look into such cases more closely. Though , tax authorities are gunning for companies for non– payment of taxes, lack of clarity on treatment of carbon credits is also an issue. Industry has for sometime lobbied for clarity on tax treatment of carbon credits. Presently, there is no clear definition in the tax laws about treatment of carbon credits. They can both be accounted for as capital assets or goods. Industry has pitched for treating them as capital assets and further exempting them from capital gains tax. If treated as goods the income generated from their trading is treated as business income attracting 30 per cent corporate tax. "The tax treatment of receipts from sale of CERs will very much be driven by whether CERs are goods or intangible assets which is currently a grey area. The ICAI's exposure draft proposes to consider CERs as intangible assets but to be accounted for as inventories and that could be a possible reference point," said Amitabh Singh, partner, Ernst & Young. Under the Kyoto Protocol companies from developing countries earn carbon credit for each tonne of carbon dioxide emission they avoid. These carbon credits can be sold to companies or governments in developed countries that are under mandatory obligation to reduce carbon gas emissions. The buyers can then offset their own targets against the CERs they purchase from companies in developing countries under the UN's Clean Development Mechanism (COM) . Trading in CERs is a growing area that has generated huge interest in the country's corporate sector. According to estimates, the industry has al ready invested close to Rs 60,000 crore into projects that will generate more than four crore carbon credits by the end of 2012. A World Bank study has pegged the total global market size for carbon credits at $10 billion. Courtesy: The Economic Times New Delhi, 2Sh June 2010. US CLIMATE BILL BODES WELL FOR INDIA'S CLEAN DEVELOPMENT MECHANISM PROJECTS The recently introduced climate bill in the US, which seeks to curb emissions by setting up a cap-and-trade mechanism, if passed, will strengthen the post-2012 carbon trade and could open up a new market for the Indian COM 45