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its about most contemporary issue of " carbon credits " in environmental economics
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By:ANJANI Kr. YADAVRAJAN MANTRI
CARBON CREDIT
Birth of Carbon Credit
Concept of Carbon Credit
Growth of Carbon Credit
India’s Position
The Major Concern…
GLOBAL WARMING
Green house gases leading to
Global WarmingCO2
MethaneNitrous OxideHydroflourocarbonSulphur HexaflouridePerflourocarbon
CO2t-e……one tonne of
CO2 equivalent
Birth of UNFCCC
In 1992, Rio Brazil
Objective…Green House Gases should be stabilized within a time frame.
The KYOTO PROTOCOL…
An agreement signed in December 1997 in
Kyoto, Japan
KYOTO PROTOCOL• Protocol adopted under the UNFCCC( United Nations
Framework Convention on Climate Change) in 1997, and came into effect in 2005.
• Countries were segregated into 3 categories- Annex I, Annex II and Non-Annex I.
• Annex I comprises of 41 countries, industrialized countries and economies in transition. The target specified is to reduce GHG emission from 1990 level by 5.8%.
• Annex II comprises of 21 countries which are a subset of Annex I part of OECD(Organization for Economic Co-operation and Development). They have additional targets of reducing GHG emissions in developing countries.
• Non Annex I comprises of 145 countries, which don’t have any target specific goals according to the Protocol, but have to decrease the carbon emissions.
A carbon credit is a generic term for any tradable certificate or permit representing the right to emit one tonne of carbon dioxide or the mass of another green house gas equivalent to one tonne of carbon.
The goal is to allow market mechanisms to drive industrial and commercial processes in the direction of low emissions or less carbon intensive approaches than those used when there is no cost to emitting carbon dioxide and other GHGs into the atmosphere. Since GHG mitigation projects generate credits, this approach can be used to finance carbon reduction schemes between trading partners and around the world.
Carbon credits differ from carbon allowances although the term carbon credit is interchangeably used to represent both
Carbon credit Carbon Taxes
price may be more likely to be perceived as fair by those paying it.
complex, expensive, and time-consuming to implement.
help to ensure that all investment goes into genuine sustainable carbon reduction schemes.
Chances of cheating
if correctly implemented a target level of emission reductions may be achieved with more certainty.
the actual emissions might vary over time
provide a framework for rewarding allows for more centralized handling of acquired gains
worth of carbon is stabilized by government regulation
relative disadvantage to new or growing companies.
The Kyoto Protocol……Objectiv
e
Reduction of Green House Gases emission by developed
countries in theThe First Commitment Period
(2008-2012)
WHY
Contribution to GHGs
What is Carbon Credit under the KYOTO
Protocol…
A credit for reducing 1 ton of CO2 (Green
House Gases) from the atmosphere
How to generate Carbon Credits???
CARBON CREDITS
METH
ANECO2
METHANE
CO2
EARN CARBON CREDIT
METHANE
USE OF CARBON CREDITS IN
EMISSION REDUCTION
REDUCTION
NATIONAL MEASURES
ADDITIONAL MEASURES
THE FLEXIBILITY MECHANISM
Clean developm
ent Mechanis
m
Joint implementa
tion
Emission
trading
FLEXIBILITY MECHANISM
Project based
International Emissions Trading
Market based approach used to attach a price to emitting GHG’s.
Also called the Cap-and-Trade method.Cap - Central Authority sets the cap or limit on the
total amount of emission that can be done based on the commitment in Kyoto Protocol.
Trade - Firms can only release GHG’s equivalent to the amount of carbon credits in their possession. Exceeding the limit leads to carbon tax/penalties
Emission Trading
Developed
country A
(needs CC)
Developed
country A
(needs CC)
Developed
country B
Developed
country B
Earns carbon credits called
Assigned Amount Units
Sell these carbon credits
Payment for CC
JOINT IMPLEMENTATION
The mechanism known as “joint implementation,” defined in Article 6 of the Kyoto Protocol, allows a country with an emission reduction or limitation commitment under the Kyoto Protocol (Annex I Party) to earn emission reduction units (ERUs) from an emission-reduction or emission removal project in another Annex I Party, each equivalent to one tonne of CO2, which can be counted towards meeting its Kyoto target.
Under Joint Implementation, countries with commitments under the Kyoto Protocol are eligible to transfer and/or acquire emission reduction units (ERUs) and use them to meet part of their emission reduction target.
Joint Implementation
Developed
country A
(needs CC)
Developed
country A
(needs CC)
Developed
country B
Developed
country B
Sets a project
Earns carbon credits called
Emission Reduction
Units
Sell carbon credits
CDMAccording to the UNFCCC,
“The clean development mechanism defined in Article 12 of the Protocol allows a country with emission limitation commitment to implement an emission-reduction project in developing countries.”
There is no transfer of carbon credits from one entity to another. There is only creation of new carbon credits.
Clean Development Mechanism (CDM)
Developed
country (needs
CC)
Developed
country (needs
CC)
Developing
Country
Developing
Country
Earns carbon credits called
Certified Emission Reduction
Sells carbon credits
Sets a project
Economics of CDMAdvantages:Sustainable development in host countryContribution to technology transferContribution to financial flowImprove cost effectiveness of GHG
mitigation in developed countries.Help reduce carbon leakage of emissions
Concept of VER’s
Countries not committed to the protocol
Voluntary Emission Reduction
ORVerified Emission
reduction
VER
What should be the price of carbon????
At present, price of 1 carbon credit is 10 Euro to
15 Euro
The price of the carbon credits is set by the principles of demand and supply.
The government slowly reduces the number of carbon credits in the market, increasing their prices and making it more feasible to reduce GHG’s than to buy carbon credits.
Market for Carbon Trading……
Currently there are 5 Environmental Exchanges, trading in Carbon Credits
POWER NEXT
EUROPEAN CLIMATE EXCHANGE
India’s Stance in Carbon Credits
India and the Kyoto Protocol
India is a Non Annex I country.As of Sept 2012, it hosts 29.5% of CDMAccording to the Planning Commission Report, the
total CO2 emission in 1990 was 10,01,352 Gg-Giga gm
Various projects are estimated to produce about 306 million CERs.
India’s contribution to carbon credits stands at $1 billion, out of a global trading of about $5 billion. India has generated about 30 million carbon credits and has a line-up of about 140 million to introduce into the global market.
These comprise chemical units, plantation companies, municipal corporations and waste disposal units that can easily sell their carbon credits for good amounts of money.
India along with China, lead countries in earning Carbon
Credit
India pocketed Rs 1,500 crores in the year 2005 just by selling carbon
credits to developed- country clients.
India has generated 30 millionCarbon credits & 140 million are in pipeline
Some of the Leading companies of India using &
selling Carbon Credits…
GUJARAT FLOUROCARBONS Ltd.
Adani Power managed to reduce GHG emissions by 1.8 million CERS in the Mundra Project in Gujarat.
So it sold the excess carbon credits, getting about 600 crores from the transaction.
SRF….
The major beneficiary of reducing GHG’s
What after 2012… End of Commitment Period???
2009 UNFCCC – Copenhagen No firm promises made, agreement to halve carbon emissions by 2050. Acknowledged Copenhagen Accord to keep temperature rise below 2°C.
2011 UNFCCC – Durban Agreement to make a legally binding deal by 2015 coming into effect by 2020. Development of Green Climate Fund to distribute $100 billion to poorer countries to fight climate change.
Thank You……