CARBON TRADING

SUBMITTED BY ANITHA M R AYSHARYA S

ORIGIN The carbon trade is an idea that came about in response to the Kyoto Protocol. The Kyoto Protocol is an agreement under which industrialized countries(Annex I) will reduce their greenhouse gas emissions between the years 2008 to 2012 to levels that are 5.2% lower than those of 1990. All the Annex I and non Annex I countries nominated a designated national authority to manage its emissions

DEFINITION Carbon trading is the buying and selling of environmental services, including the removal of greenhouse gases from the atmosphere, which are identified and purchased by eco-consulting firms and then sold to individual or corporate clients to offset their polluting emissions.

IMPORTANCE OF CARBON TRADING Carbon is the common denominator in all-polluting gases that cause global warming. Carbon dioxide is the gas most commonly thought of as a greenhouse gas and it is responsible for about half of the atmospheric heat retained by trace gases. The levels of CO2 in the atmosphere has increased from 260 parts per million to around 375ppm over the last 300 years, most of the increase has taken place at an accelerating pace over the last 100 years which results in an annual account of 20% increase in CO2 in the atmosphere.

IMPORTANCE OF CARBON TRADING

IMPORTANCE OF CARBON TRADING A global effort will be needed to reduce greenhouse gas emissions and to arrest climate change. The Intergovernmental Panel on Climate Change (IPCC) have predicted that unless emissions of greenhouse gases decrease there will be a temperature increase of between 1.4oC and 5.8oC by 2100.

WHAT IS EMISSIONS TRADING?

Company A can reduce 1000 tons CO2E at $2/ton = $2000 SELL

Company B can reduce 1000 tons CO2E at $6/ton = $6000 BUY

1000 tons CO2E at $4/ton = $4000

$2000 Profit
Company A - Seller

$2000 Savings

Company B - Buyer

WHAT IS EMISSIONS TRADING?

A CER or carbon Credit is defined as the unit related to reduction of 1 tonne of CO2 emission

CARBON PERMIT, CREDIT & OFFSET

Carbon credits and offsets are the same thing, both being

equal to one metric ton of GHG emissions. Carbon permit means that its holder has the right to pollute up to a certain level. A carbon credit or offset is a certificate stating that someone else has made a commitment to reduce carbon emissions on behalf of the owner of the credit or offset. People, governments, and businesses can buy, sell and trade carbon credits, offsets, and permits in the various carbon markets.

HOW KYOTO PROTOCOL FACILITATES CARBON TRADING

Polluting organisations meet Each industrialised country: the terms by: sets a 'cap' on emissions creates 'permits' equal to its 'cap' using 'allowances' requires organisations to meet their reducing their emissions, and selling excess permits 'target' within the 'cap' buying permits from the government Credits arise from buying permits from someone emission reduction projects: else in industrialised countries buying credits (often expensive)
in developing countries

(often inexpensive)

EXPECTED EMISSION REDUCTION 2012 AS KYOTO PROTOCOL

INDIAN SCENARIO
Developing nations like India tend to gain immensely from

carbon trading Small scale industries develop and implement new eco-friendly technologies that are highly energy efficient by mass employing labour workforce India can gain by selling their credits to developed countries that persistently need them to make both sides of the Carbon ledger match Small scale industries are the biggest beneficiaries of this system as they have the luxury of using the cheapest and most energy efficient means i.e. raw labour Using manual labour tremendously reduces the output of pollutant gases besides helping reduce unemployment.

PERSONAL CARBON TRADING

an innovative, radical policy approach to climate mitigation in

which emission rights are allocated to individuals. for each purchase of carbon-based energy, allowances would be deducted from the individual's carbon budget i.e., every time people pay an energy bill, buy petrol, or book a flight they will also have to surrender carbon units. If people emitted more carbon than their allowance, they would need to buy additional carbon credits. those who emitted less carbon than their allowance could sell the excess into the personal carbon market. The personal allowance would be reduced periodically in line with national emissions targets. Delivering emission reductions by altering millions of individuals' energy-use choices and behavior remains an unmet policy challenge.

ADVANTAGES
Emitters are given flexibility

DISADVANTAGE S
Still requires monitoring,

and control Firms choose to emit/reduce Rewards innovation and investment in new technology an incentive to go beyond minimum requirements Common price signal ensures that reductions take place where they are least costly achieves environmental goals at least cost The overall cap on emissions ensures environmental objective is achieved

reporting, verification and compliance infrastructure - like traditional regulation May result in increased local concentrations of emissions Price is uncertain determined by market Relies on a price signal some markets may be less efficient Allocation of target/allowances is highly arguable

CARBON TRADE: A BOON OR CURSE ?

Some NGOs and green businesses favor the carbon trade and view

it as a win-win solution that ensures environmental protection with economic prosperity, whereas other environmentalists and grassroots organizations claim that it is no solution to environmental problems such as global warming. It's hard to know whether the economy generated from this actually makes any real difference in reducing carbon emissions. Carbon trading is just a clever way for polluters to buy their way out of environmental responsibility. With enough cash, they can legally keep on polluting the skies and driving us ever closer to CO2 tipping points. Within trading schemes such as the ETS( European Trading Scheme), whole sectors' emissions are excluded, such as transport, homes and the public sector.

CARBON TRADE: A BOON OR CURSE ?