CARBON CREDIT

GREEN BUCKS

FROM

GREEN EARTH
 Green House Gases
• Global Warming increased, awareness of the need for pollution
control internationally – entering into international agreement –
Kyoto Protocol – Birth to the concept of Carbon Credit

• Green House Gases (GHG) – emission is through fuel combustion

in industries –affect the ozone layer, leading to global warming.
• GHG –

1. Carbon dioxide –(C02)

2. Nitrous Oxide – (N2O)
3. Perfluorocarbons –(PFCs)
4. Methane Oxide – ( CH4)
5. Hydro fluorocarbons –(HFCs)
6. Sulphur hexafluoride-(SF6)
 KYOTO PROTOCOL
1997 -Treaty was negotiated in Kyoto, Japan –
1998- Opened for signature -1998
1999 –Close and
2005 - Agreement came into force – 169 Countries
Kyoto Protocol is an agreement under which
industrialised countries will reduce their collective
emissions on GHG by 5.2% compared to the year
1990 – calculated as an avg. over the five-year
period of 2008 – 2012. Reduction target expire in
2013.
 KYOTO PROTOCOL
KYOTO MECHANISM
• Developed Countries – (Annex 1) Countries who have accepted GHG
emission reduction obligations
• Developing Countries –(Non-Annex 1) Countries who haves no GHG
emission reduction obligations but may participate in the Clean
Development Mechanism (CDM)
Annex 1 countries that fails to meet its Kyoto target will be penalised by
having to submit 1.3 emission allowance in a second commitment period
for every ton of GHG they have exceed their cap in the first commitment
period (2008-2012)
THREE MECHANISM
1. Clean Development Mechanism (CDM):A developed country ( Annex 1 )
would take up GHG reduction project activities in a developing countries
( Non Annex 1 ) where the costs of GHG reduction project activities are
much lower. The credit in CDM is termed as Certified Emission Reduction
(CERs). This can be used first commitment period. (2000-2007).

.
 KYOTO PROTOCOL
2. Joint Implementation (JI ): Annex 1 to Annex 1 –
Relative low cost. The credit generated out of
JI is called as Emission Reduction Units (ERU).
ERU will only be issued after 2008.
3.International Emission Trading (IET): Countries
can trade in the international carbon credit
market. Countries with surplus credits can sell
the same to countries with quantified emission
limitation and reduction commitments under the
Kyoto Protocol.

.
 Carbon Credit
• Carbon Credit:-Carbon credits in lay man's language are credits
that have to be purchased by the companies that emit green houses
gases in the atmosphere which cause the ozone layer to deplete
causing global warming.
• How does this work ?
Companies that release GHG in the atmosphere would have to buy
these Carbon Credit from Companies who have surplus.
Companies who use latest technology or upgrade their technology
by which they reduce the emission in to the atmosphere would get
the credit.
Non Annex 1 countries are benefited as new plants can be set up
which is technologically advanced but Annex 1 –Countries find
difficult as huge plants are already set up and it would be costly
affairs to shift technologies.
 Carbon Credit Trading
• Carbon Credit Trading :-According to the Kyoto Protocol all countries are
require to reduce their emissions by 5% from 1990 level to by 2012
otherwise they have to pay the price to those who do it. The idea here was
to make certain developed Countries pay for their ways of emissions and
rewarding countries that maintain a discipline in this regard.

• Carbon Trading takes place with the Certified Emission Reductions (CERs)
points. Trading takes place in the open market and it can be traded as
securities. Chicago Climate Exchange (CCX), Asian Carbon Exchange and
Europe Carbon Exchange are such exchanges in which GHG emission and
reduction system take place. However, since September 2006, Multi-
Commodity Exchange of India (MCX) has also authorised to trade in Carbon
Credit.

• Unit:- 1 Ton of CO2 emission = 1 Carbon Credit

• Rate:- Euro 6 – 8 per unit
 Carbon Credit - India
• Carbon Credit :- The Kyoto Protocol gives 35 developed countries (Annex
1 ) to buy carbon credit from developing countries ( Non-Annex 1 ) like
India.

• Present rate of Carbon is at Euro 6-8 on the Trading Exchange in Europe

and soon might move on to Euro 10-12 and may be even Euro 15,as
Annex 1 countries are not able to control the pollution levels and they may
buy it from India, China and Brazil to meet their deadlines.
• Companies in India are investing in Windmills, Bio-diesel, co-generation and
bio-mass facilities to sell credits to developed nations, the gestation period
for these companies may be high but companies that are supply
equipments to
 India: Riding the Carbon wave
 200 Indian entities have
applied for registering their
Clean Development
Mechanism (CDM) Project
under Kyoto Protocol

 Market share of 32.86% in

CDM Projects

 Volume of CERs issued till

April’07 - 18 million; leader
in this category
 Revenues earned till April,
2007 amounting to $ 234
Million second only to
China.
 Carbon Credit - India
• Nine projects worldwide have received the approval of
UNFCCC – United Nations Framework Convention on
Climate Change for trading in Carbon Credit and of those
two are Indian – Gujarat Flourochemicals Limited JSW
Limited and Grasim Industries Limited.
• 90 Projects in India already got the host country approval
and are waiting for the UNFCCC approval.
 Recent projects for Indian companies
• JSW steel was awarded 5.4 Million CERs for two projects. It was Single Largest Issuance.
The CDM project by JSW Steel consisted of setting up a 100 MW power plant
for generation of electricity by combustion of waste gases from their Blast
Furnace and Corex units in their plant in Tranquillo, Karnataka. It earned
revenues of Rs.112 Crores.
The CDM project by JSW Energy involves putting in place systems and infrastructure for
the generation of power using Corex gas and other waste gases that were otherwise being
flared off in JSW Steel Limited (JSW)1 . The input fuel to the JSW Energy power plant is
sourced from JSW, which is generating waste gas from its process and sourcing imported
coal. It earned revenues of Rs.330 Crores.
• Grasim Industries was first Cement Company to get issue Carbon Credit. Company
replaced fossil fuels like coal, which emits carbon dioxide when burnt, with alternative
fuels in its kilns to produce to cement. It earned revenues of Rs. 55 Crores.
. Gujarat Fluorochemicals (GFL) makes HFC-22, a gas used in refrigeration units. HFC-23, a
by-product and a greenhouse gas, is considered even more harmful than carbon dioxide.
GFCL burns HFC-23 before it leaks into the atmosphere. This has earned it 6.5 million
CERs
 Carbon Credit / Trading
• Process of Approving the CDM Projects :
– International Level
• After Home Country Approval, project referred to Executive
Board of UNFCCC
• Validation : Independent evaluation of the project by
UNFCCC
• Registration : Is given if it is suitable for emission reduction
• Verification : Periodic independent review to check the
reduction of emission
• Certification : is doe for the reduction in the emission and
then only Credits are issue.
 Carbon Credit / Trading
• Conclusion
The demand for carbon credits is here to stay at least
for the next eight years, and by that time it may
happen that exemptions on the developing countries
may be lifted and even they would be asked to
comply with emission norms that might be even more
stringent which might create a perpetual market for
carbon trading and the same would be traded as we
trade stocks and commodities in daily life.