Carbon Credit Trading Gr 6 EPGDIB Rev 1

8/3/2019 Carbon Credit Trading Gr 6 EPGDIB Rev 1

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ContentsContents

Reason of Climate change and its effectReason of Climate change and its effect

Factor contribution to Co2Factor contribution to Co2

What is Carbon tradingWhat is Carbon trading

I

II

III

Carbon Credit & Its TradingCarbon Credit & Its Trading

UNFCCC & Kyoto ProtocolUNFCCC & Kyoto ProtocolIV

Kyoto MechanismKyoto MechanismV

Type of Carbon TradingType of Carbon TradingVI

EPGDIB 2010-12 - Group VI

Meharban Singh - 25

Praveen Nambiar - 35

Sanjay Chowdhury - 54

Sheikh Abdul Hamid - 59

Suhita Singh - 64

Viranchi Rastogi - 70

Carbon trading processCarbon trading processVII

Opportunity for Indian companiesOpportunity for Indian companiesIX

Development in IndiaDevelopment in IndiaVIII

Commodity Price Risk ManagementCommodity Price Risk Management


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CPRMWhat are Reasons for Climate change & Its effects

IIFT - EPGDIB -2010-12 / Group- VI ( Academic purpose only )


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CPRMContribution to Co2 ! Source



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CPRM

Carbon credits is an element used to aid in regulation of the

amount of gases that are being released into the air. This is part of

a larger international plan which has been created in an effort to

reduce global warming and its effects.

The plan works by capping the amount of total emissions that

can be released by one company or business.

Carbon Credit


If there is a shortfall in the amount of gases that are used, there is

a monetary value assigned to this shortfall and it may be traded.

These credits are often traded between businesses.

However, they also are bought and sold in international markets atwhatever market value is determined for them.

Sometimes these credits are used to fund carbon reduction plans

between trading partners


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CPRM

1 ton of CO2 or its equivalent greenhouse gas

(GHG) which is an entitled certificate by

UNFCCC.

What is Carbon Credit

1 Carbon Credit

UNFCC : United Nations Framework Conventionon Climate ChangeS. No Greenhouse Gas Global Warming Potential(GWP)

1 Carbon Dioxide 1

2 Methane 21


4 Hydrofluoro Carbons 140-1170

5 Perfluoro carbons 6500-9200

6 Sulphur Hexafluoride 23900

There are two types of market in carbon credit:

- Compliance Market (Annexure I countries)

- Voluntary Market (Non- Annexure countries)


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CPRMTypes Of Market In Carbon Credit



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CPRM

Act signed by 165 nations in 1992 at Rio de Janeiro.

Annex 1 & Non-Annex 1 countries.

Annex 1 (developed countries) agreed to reduce their GHGs by 5.2%st

What is UNFCCC

United Nations Framework Convention on Climate Change


.


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CPRMINDIA AND KYOTO PROTOCOL

India signed and ratified the Protocol in August, 2002

Since India is exempted from the framework of the treaty, it is

expected to gain from the protocol in terms of transfer of

technology and related foreign investments

India maintains that the major responsibility of curbing


,

accumulated emissions over a long period of time.

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CPRMKYOTO Protocol

Annex I

Austria

Belgium

Monaco

Canada

Netherland

New Zealand

Non -Annex-B

India

Bangladesh

Brazil

China

Afghanistan

Algeria


United Kingdom

Germany

Spain

SwitzerlandGreece

Nepal

Argentina

Bolivia

Sri Lanka

PakistanMalaysia

Mauritius

Participation in the Kyoto Protocol, where green indicates countries that have signed and ratified the treaty (Annex Iare in dark green), grey is not yet decided, and brown is no intention of ratifying.

Annex I

Non-Annex -B

Not ratified


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CPRMKYOTO /EMISSION REDUCTION MECHANISM

IIFT - EPGDIB -2010-12 / Group- VI ( Academic purpose only ) 11


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CPRM

IDENTIFICATION OF PROJECT AND

DEVELOPMENT OF PROJECT CONCEPT NOTE

DEVELOPMENT OF PROJECT DESIGN

DOCUMENT

APPROVAL BY NATIONAL CDM AUTHORITY OF

HOST COUNTRY

CDM PROCESS


VALIDATION

REGISTRATION

CERTICATION

VERIFICATION


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CPRMCARBON TRADING

A carbon trading system allows the development of a market

through which carbon dioxide or carbon equivalents can be traded

between participants, whether countries or companies. Each carbon

credit is equal to 1 metric tons of carbon dioxide, which can betraded or exchanged in market.


There are two kinds of carbon trading Emission trading andtrading in Project-based Credits. The two categories are put

together as Hybrid trading System

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CPRMTYPES OF CARBON TRADING

1. EMISSION TRADING:

A company can reduce its emission by half the cost of allowance bought from

other company

On the other hand, a company with higher expenditure for reduction of i ts

emissions buys the required allowance from other company to save i tsemission cost

2. PROJECT-BASED TRADING:

Government & World Bank subsidized credit for ro ect-based tradin to the


companies calculating how much carbon dioxide equivalent theysave/reduces

Project-based Credit trading includes baseline-and-credit t rading and

offset trading

3. HYBRID TRADING SYSTEM:

In Hybrid trading system, both emission trading and offset trading are used

and try to make allowance exchangeable for project-based credits.

Hybrid trading system is enormously complex as it is not only difficult to try

to create credible credit and make them equivalent to allowance15


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CPRMCarbon Network

Seller

Banks

Individuals

Buyers

Annex 1country

Banks

Exchange

Trading

exchange

Banks


Consultants

Annex 2 & 3

countries

Others

Individuals

Consultants

Others

NGO &

Government

Brokers &

Traders

Intermediary

serviceproviders

Consultants

NGO &Govt.

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CPRMParties Involved in Carbon Trading

PROJECT ENTITY: Joint venture company or a limited partnership thatare set up specifically to undertake the project

SPONSOR: Individuals/companies/entities that support a project who

have a direct or indirect interest in the project.

LENDER: If the project is financed through debt, one or more banks may

be lenders.

EQUITY PROVIDER:Equity may be provided by project sponsors or third


party investors who ensure that the project produces a ROI as set out inthe business plan.

CONSTRUCTOR:Who have responsibility for the completion of the works,

& often have to assume liability for finishing construction on time and to

budget.

OPERATOR:Person responsible for the operation and maintenance of the

project facilities once completed


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CPRM

SUPPLIER

BUYER

INSURER:If a risk is to be mitigated by purchasing insurance, the lender

will need to be satisfied as to the track record and credit-worthiness of

the insurer.

RATING AGENCIES: The rating agencies may be involved if the

financing of the project involves the issue of securities

Parties Involved in Carbon Trading


EXPERTS: Experts are individuals who give advise on key technical,engineering, environmental and risk aspects of a project.

HOST GOVERNMENT:The role of the host government varies but may

involve economic, social , environmental guidel ines & issuance of

relevant consents, permits & licenses

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CPRM

New cash source to companies who are able to maintain their

emission levels well within the permissible limits.

The overall ecological balance is preserved

The company or country gets rewarded for applying clean

technology in its production process.

Advantages of Carbon Trading


muc e er corpora e an soc a mage w c w ns pu c

approval

Encourages activities like tree plantings which would help reduce

soil salinity, improve water quality and enhance biodiversity


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CPRM

Supply-demand mismatch

Crude oil prices

CO2 emissions

Foreign exchange

fluctuations

Price Influencing Factors

Policy issues

Coal prices

European Union Allowances(EUAs) prices

Global economic growth


Key Risks and Uncertainties

The extent to which the Kyoto Protocol guidelines are

implemented & followed

The attitude of US which is the biggest polluter and had refusedto sign the treaty

The final rules and decisions relating to an emissions trading

market


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CPRMPosition of India

India is considered as the largestbeneficiary, claiming about 31 % of

the total world carbon trade through

CDM It is expected to rake in at least Rs

22,500 crore to Rs 45,000 crore over


are expected to corner at least 10 per

cent of the global market in the initial

year

If India can capture a 10% share ofthe global CDM market, annual CER

revenues to the country could range

from US$ 10 million to 300 million


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CPRMCarbon Trading at MCX

The Multi Commodity Exchange of India Ltd entered into analliance with the Chicago Climate Exchange in 2005 to introduce

carbon credit trading in India

MCX is the futures exchange. People here are getting price

signals for the carbon for the delivery in next five years. The

exchange is only for Indians and Indian companies

The Indian government has not fixed any norms nor has it made it


compulsory to reduce carbon emissions to a certain level. So,people who are coming to buy are actually financial investors

Trading Benefits

Sellers and intermediaries can hedge against price risk

Advance selling could help project to generate liquidity and therebyreducing its cost of implementation

There is no counter party risk as exchange guarantee the trade

The price discovery on the exchange platform ensure the fair pricefor both the sellers and buyers

Bring players to a single platform 22


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CPRM

Andhyodaya Green Energy

Grasim Industries Ltd.

Indo Gulf Fertilizers

Indus Technical & Financial

Consultants Ltd

Madh a Pradesh Rural

Reliance Energy Ltd.

Tata Motors Limited

Tata Steel Limited

Bajaj Finserv Limited

Dhariwal Industries Ltd

Tata Power Com any Limited

Carbon Credit Traders in India


Livelihoods Project

Rajasthan Renewable

Energy Corporation

BlueStar Energy Services Inc.

Valera Global Inc.


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CPRMOutlook For India & Companies : Taking Advantage

India is one of the exempted from this protocol as they are statedas developing countries, but overseas companies can buy carbon

credits from these countries.

Now companies in India can use Carbon credits to get liberal

loans, incentives by multinationals in their countries and benefits

like better social and ecological visibility

Examples


Gujarat Fluoro Chemicals is amongst first companies worldwide toget its carbon emission reduction project certified. It is set to reap

rewards from the sale of CER credits from this year itself

Tata Steel is believed to have signed a MoU with the Japanese

government agency NEDO for sale of credits accruing to it from

carbon reduction following the implementation of an over Rs 250

crore modernization and upgradation project

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CPRMIndian Companies : Taking Advantage

NTPC and several state electricity boards have also applied for

carbon credit benefits. Most of them are replacing coal-based

technologies with more environment-friendly processes

Of the 15 projects approved by the UNFCCC so far, four areIndian. These four are:

Gujarat Flurochemicals,


,

The Clarion power project in Rajasthan and

The Dehar power project in Himachal Pradesh

The country accounted for 283 CDM projects out of the 819

registered by the CDM Executive Board, the environmentministry, the World Bank and the International Emissions Trading

Association


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CPRMConclusion

There is a great opportunity awaiting for India in carbon tradingwhich is estimated to go up to $100 billion by 2010

In the new regime, the country could emerge as one of the largest

beneficiaries accounting for 25 % of the total world carbon trade,

says a recent World Bank report

Analysts claim if more companies absorb clean technologies, total

CERs with India could touch 500 million.


Of the 391 projects sanctioned, the UNFCCC has registered 114from India, the highest for any country.

There are projects range from cement, steel, biomass power, bio-

gases co-generation and municipal solid waste to energy,

municipal water pumping and natural gas power. The ministry has

given the host-country clearance, the CDM projects will have to

be approved by the executive board of the UNFCCC


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CPRMExchange Rates



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CPRMCarbon fund



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CPRMSummary .



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Action toward saving Earth .

Documents

Carbon Credit Trading Gr 6 EPGDIB Rev 1