Carbon Credits

Sub : Economics Environmental Business Date : 17 / 1 / 11

Abhijeet Patil Shoeb Momin Snehal Badane Neha Parkhi V. Shrividya Viraj More

Presented By: Roll No. 15 Roll No. 12 Roll No. 16 Roll No. 26 Roll No. 25 Roll No. 07

Summary
GHGs & Pollution

Kyoto Protocol
Carbon Credit Trading India and Carbon Credit Current Facts !!

GHGs and Pollution

Nitrogen oxide

Carbon Dioxide
Sulfur Hexafluoride

Methane

The scientific evidences show that the temperature on Earth may increase by 1.45.8 deg. C. by 2100

Global Warming Future Impact

Emission of Carbon Dioxide World Over

About half the electricity used in the United States comes from burning coal. China depends on coal even more. Burning coal puts out more greenhouse gases than does any other single source of electricity.

The Kyoto Protocol

The Kyoto Protocol is an international agreement linked to the United Nations Framework Convention on Climate Change(UNFCCC) passed on 11 December 1997 in Kyoto, Japan but came in force on 16 February, 2005. Countries that ratify this protocol commit to reduce
their emissions of carbon dioxide and five other greenhouse gases, or engage in emissions trading if they maintain or increase emissions of these gases.

Kyoto Protocol is a voluntary treaty signed by 141 countries, including the European Union, Japan and Canada for reducing GHG emission by 5.2% below 1990 levels by 2012.

The Kyoto Protocol

Sets targets for nations to reduce the emission of the GHGs
Employs several mechanisms that help reduce the emission of the GHGs The preliminary phase of the Kyoto Protocol ends in 2007 while the second phase starts from 2008. The penalty for non-compliance in the first phase is Euro 40 per ton of carbon dioxide (CO2) equivalent. In the second phase, the penalty is hiked to Euro 100 per ton of CO2.

The Kyoto Protocol

The protocol provides three mechanisms to the developed nations to meet the emission targets.

Kyoto Protocol

CDM JI

ET

Kyoto Protocol - Mechanisms

1. Clean Development Mechanism (CDM):

This mechanism allows developed (or Annex 1) nations to receive emission credits towards their own emission targets by participating in certain projects in developing (or Non-annex 1) countries.
These Clean Development projects must be approved by members of the Protocol and must contribute to sustainable development and greenhouse gas emission reductions in the host developing country.

Kyoto Protocol Mechanisms

2. Joint Implementation:
This mechanism allows Annex 1 nations to receive emission credits towards their own emission targets by participating in certain projects with other Annex 1 nations. These Joint Implementation projects must be approved by all nations participating in the project, and must either reduce greenhouse gas emissions or contribute to enhanced greenhouse gas removal through emission sinks (i.e. reforestation).

Kyoto Protocol Mechanisms

3. Emissions Trading:
This mechanism allows nations to purchase emission credits from other countries. Some countries will be below the emission targets assigned to them under the Protocol and, as such, will have spare emission credits. Under the emissions trading system, other nations may purchase these spare credits and use them towards their own emission targets.

Projects under CDM

End-use Energy Efficiency Improvements

Supply-Side Efficiency Improvements

Renewable Energy Fuel Switching Agriculture (CH4 and NO2 reduction projects) Industrial Process

Carbon Reduction Mechanism

* Source: A Non-Traditional Source of Revenue for Mississippi Forest Landowners

Carbon Credits
Carbon credits are certificates issued to countries that reduce their emission of GHG (greenhouse gases) which causes global warming A CER is given by the CDM Executive Board to projects in developing countries. For example, if a project generates energy using wind power instead of burning coal, it can save 50 tons of carbon dioxide per year. There it can claim 50 CERs Ideally, Carbon credits can essentially be viewed as a means of empowering the market to care for the environment.

1 Carbon Credit 1 metric tonne of CO or its equivalent 2

greenhouse gas (GHG) which is an entitled certificate by UNFCCC.

Mechanisms to Trading
Carbon Trading Market
Company B Company A

Carbon Credit Trading - CDM

Annex I party
Carbon Credits

Emission reduction project at non Annex I Party

The CDM project reduces the carbon emissions in the CDM country

Emission cap

Actual emissions

Buyer

Carbon value ()

The Project and Allowance Based Market

Who is Buying?

United Kingdom

59%

6% 11% 12% 4% 4% 2% 2%

Other EU Countries Japan Europe-Baltic Sea Austria Spain Italy Others

Who is Selling?
Worldwide Carbon Credit Selling Market

China
India
14%

Brazil Others
8%

53%

Korea
7%

Mexico Chile

6% 2% 2% 4%

Argentina
Indonesia Malaysia South Africa

1%

1% 1% 1%

Qatar

Carbon Trading Exchanges

Chicago Climate Exchange (Chicago, US) European Climate Exchange (London, UK) Nord Pool (Oslo, Norway) Power Next (Paris, France) European Energy Exchange (Leipzig, Germany)

INDIAN COMPANIES TAKING ADVANTAGE

Madhya Pradesh Rural Livelihoods Project, Blue Star Energy Services Inc., Indo Gulf Fertilizers Indus Technical & Financial Consultants Ltd Corporation

Rajasthan Renewable Energy Ltd Dhariwal Industries Tata Power Company Limited

INDIAN COMPANIES TAKING ADVANTAGE

Gujarat Fluoro Chemicals
First companies worldwide to get its carbon emission reduction project certified. Deal for sale of its carbon credits to the UK (2005-06 ) and with Netherlands(2006-07).
Signed a memorandum of understanding (MoU) with the Japanese government agency Nedo for sale of credits Encashed the carbon credits it earned and until now received Rs 17 crore by selling these credits in Europe 2.5 million units of carbon credits to European agencies for Rs 250 crore.

Tata Steel Grasim Industries

SRF

DMRC

First rail project in the world to earn carbon credits because of using regenerative braking system in its rolling stock. DMRC can now claim Rs 1.2 crore per year

India and Kyoto Protocol

India became the signatory of the Kyoto Protocol in August 2002
Enjoys Provisions for a Developing Country Exempted from the framework of the treaty

Assertion of the US on India and China in the Carbon Market

Currently an active member in the current trade

India & Carbon Credit Market

The Kyoto protocol allows 35 developed nations to buy carbon credits from countries. India is one such country that has permission to sell the carbon credits As on 26 March 2010, 497 out of total 2116 projects registered by the CDM Executive Board are from India, which is next only to China with 779 projects.
Certified Projects
Others 32% India 20%

China 48%

Indias Potential
Kyoto protocol, under which all these carbon credit trading stuff take place, theoretically, is valid only until 2012 The National CDM Authority (NCDMA) in India has accorded Host Country Approval to 1226 projects facilitating an investment of more than Rs.151,397 crore If all these projects get registered by the CDM Executive Board, they have the potential to generate 573 million Certified Emission Reductions (CERs) by the year 2012 At a conservative price of US $ 10 per CER, it corresponds to an overall inflow of approximately US $ 5.73 billion in the country by the year 2012 India is expected to make in $100 million annually by trading in carbon credits.

Carbon Credits - Advantages

1. Technology transfer from developed to developing countries (Due to low cost structure in developing countries). 2. Additional source of foreign investment in developing countries which act as a catalyst in developing cleaner technologies. 3. Development of cleaner technologies leading to sustainable development where countries have a strategic advantage from now in terms of pollution. 4. Environmental benefits due to lesser GHG emissions.

Carbon Credits - Disadvantages

1. Provision of cheapest way of purchasing climate destroying right.

2. Complex procedures involved.

3. CDM timeframe may not assist long-term development strategies as the timeframe is foreseeable till 2012 only. (Most projects developed with short term perspective). 4. The developed countries purchase CERs rather than finding new ways of reducing emissions by technological development.

1. 2.

World bank has also purchased CERs from 10 companies. According to World Bank estimates, India is expected to rake in $100 million annually by trading in carbon credits and Indian companies are expected to corner at least 10 per cent of the global market in the initial years. Last year global carbon credit trading was estimated at $5 billion, with India's contribution at around $1 billion. MCX has become first exchange in Asia to trade carbon credits. Globally, greenhouse gas emissions are expected to come down by 2.5 billion tonne by 2012. According to industry estimates, Indian companies are expected to generate at least $8.5 billion India has generated some 30 million carbon credits and has roughly another 140 million to push into the world market.

3. 4. 5.

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Bibliography
www.carboncredits.com www.carbonplanet.com www.cdm.com www.crm.com

Thank You !!!