New Delhi, Sep 8 (IANS) India Inc and the United Nations Framework Convention on Climate Change (UNFCCC) Wednesday said there should be more clarity and flexibility in the Clean Development Mechanism (CDM) for carbon trading.

“The global carbon market is dogged by uncertainties arising out of the lack of clarity on how CDM would evolve,” said Christiana Figueres, executive secretary, UNFCCC, on the sidelines of India Carbon market conclave 2010, organized by Federation of Indian Chambers of Commerce and Industry (FICCI).

Industry stalwarts on other hand demanded a regulatory framework in developing countries that recognizes the role of markets to leverage mitigation of carbon emissions.

“There is need for a clear direction on the manner in which carbon credits should be treated in balance sheets and the Direct Tax Code (DTC) move to tax carbon credits would be discouraging for the industry,” said Y.K. Modi, chairman, Great Eastern Energy Corporation Ltd.

He also said Indian industries cannot consider quantitative emissions restrictions through an international framework, and there has to be a space to sustain and accelerate economic growth.

According to FICCI, high transaction costs of CDM projects, levying of taxes would result in a major setback for companies to engage in such projects.

It further said that to facilitate advance payment guarantee by carbon credit buyers for Indian projects, the Foreign Exchange Management Act (FEMA) guidelines needs to be suitably amended.

“These measures will not only encourage participation of the financial sector in mitigation projects but will deepen industry’s engagement in projects,” Modi added.