This article looks at new opportunities that carbon credits offers to project financing. It brings out examples of companies in India that have benefited from such an exercise. The article looks at the second stage of implementation of Kyoto protocol regarding emerging countries. The first stage of reduction of the emission of greenhouse gases was more emphasized to developed countries, like the US and UK by 2012; the second stage of compulsory carbon reduction implementation will be in 2030 for developing countries, like India and China. The demand and price of carbon credit will go up in the process.

In this competitive environment of business, we always look for new business ideas that enable us to explore the emerging opportunities in business. `Green' is the right word used in the academia for environmental projects. Industries, like agriculture, energy (renewable and non-renewable sources), friendly manufacturing, metal production, mining and mineral production, chemicals, forestation & reforestation, etc., generate carbon credits by reducing carbon emission and other hazardous gases. India is considered as the largest beneficiary of carbon trading, claiming about 31% of the total world carbon trade through the Clean Development Mechanism (CDM). In the future, carbon credits will become an important consideration in project financing in developing countries especially India (Refer Table 1). The PricewaterhouseCoopers (PwC) report on greenhouse gas emissions for the year ended December 31, 2009 looks at the impact of climate change on businesses. It is observed that the sales growth of eco products will increase by 4% yearly; whereas the growth of other products may remain more or less static.

Philips Electronics Ltd., acquired compact florescent lamps from a small vendor in a village and re-engineered the product (energy saving bulbs) to make it a world famous concept. It is quite interesting to see Philips's financing pattern. The company took finance in the name of energy saving and innovative project from financial institutions and banks. The company certified its bulbs with the UN and introduced them in the Indian market at Rs. 140 a piece. This price was much lower than those of the normal incandescent bulbs that existed in the Indian market at that time. This business model increased the company's sales by leaps and bounds. These energy and money saver bulbs were a hit. Philips also took advantage by earning carbon credits for less carbon emission and traded those carbon credits through exchange and made money in the bargain. Hence, Philips Electronics had two revenue streams, one from the revenue from sales of bulbs and the other from sale of carbon credit. Thus, this was a win-win situation for all the stakeholders—the company, government, financiers and consumers.

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