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Carbon Credits

Carbon CreditsAshish Kumar Ghosh[11312008]Neelesh Sharma[11110034]

Global WarmingTheEarth's average surface temperaturerose by0.740.18Cover the period 19062005Source:

CO2MethaneNitrous Oxide

HydroflourocarbonSulphur HexaflouridePerflourocarbon


United Nations Framework Convention on Climate ChangeEarth Summit Rio de Janeiro June 1992Objective: stabilize greenhouse gas concentrations in the atmosphere at a level that would prevent dangerousanthropogenicinterference with the climate systemMay 2011 - 195 parties (allUnited Nations member states(exceptSouth Sudan), as well asNiue,Cook Islandsand theEuropean Union)The parties to the convention have met annually from 1995 in Conferences of the Parties (COP) to assess progress in dealing withclimate change. In 1997, theKyoto Protocolwas concluded and established legally binding obligations for developed countries to reduce their greenhouse gas emissions.The 2010Cancn agreementsstate that future global warming should be limited to below 2.0C (3.6F) relative to the pre-industrial level.The 20th COP will take place in Peru in 2014

Kyoto ProtocolThe Kyoto Protocol is a legally binding agreement that arose out of the UNFCCC to tackle climate change through a reduction of green house gas emissions.Developed countries (those listed in Annex I) are legally bound to reduce man-made green house gases emissions by approximately 5.2%Individual countries have their own reduction targets outlined in Annex B of the Kyoto Protocol.

March towards a green planet

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 investmentsIndia maintains that the major responsibility of curbing emission rests with the developed countries, which have accumulated emissions over a long period of time .

The First Commitment Period(2008-2012)

Carbon TradingCap and Trade ProgramCarbon Offsetting

A carbon credit is a generic term for any tradable certificate or permit representing the right to emit one ton of carbon dioxide or the mass of another greenhouse gas with a carbon dioxide equivalent to one ton of carbon dioxide.At present, price of 1 carbon credit is 10 Euro to 15 Euro

Cap and TradeCAP Assignment of an upper threshold limit on the amount of pollutant that can be emitted (measured in Assigned Amount Units or AAUs) by a country.Emission permits or equivalent number of allowances or credits are issued to emit a specific amount of carbon dioxide (cap) to the country.1 credit= 1 ton of carbon dioxideTRADE The transfer or trade of allowances Excess or unused allowances/credits can be traded to the countries whose emissions have exceeded their assigned cap.The purchased allowances can be used to increase the allowance limit by the purchasing country.

Countries whose emissions are less than their assigned amount or the CAP can sell or TRADE the excess amount to countries whose emission have exceeded their assigned amount.

Carbon OffsettingOffset Credits for eco-friendly technologies are purchased by developed nations to avoid or substitute reduction in their own emission.Investments in green technologies and harness alternative forms of energy in the developing nations.

Carbon Network

Markets for Carbon Trading


Kyoto MechanismsEmissions trading - countries can trade in the international carbon credit market to cover their shortfall in Assigned amount units. Countries with surplus units can sell them to countries that are exceeding their emission targets under Annex B of the Kyoto Protocol.assigned amount unitsJoint implementation (JI) - a developed country with relatively high costs of domestic greenhouse reduction would set up a project in another developed country.emission reduction unit(ERU)Clean development mechanism (CDM) - a developed country can 'sponsor' a greenhouse gas reduction project in a developing country where the cost of greenhouse gas reduction project activities is usually much lower, but the atmospheric effect is globally equivalent. The developed country would be given credits for meeting its emission reduction targets, while the developing country would receive the capital investment and clean technology or beneficial change in land use.certified emission reduction (CER)


Emission Trading v/s Carbon TaxesUnited States is the strongest proponent of emissions trading as US is energy inefficient and has high per capita carbon dioxide emissions levels.

The European Union has been in favor of carbon taxes as the EU is already relatively energy efficient

The Russian Federation & the Ukraine are major supporters of emissions trading

Developing countries are extremely cautious of emissions trading, & view it primarily as a "loophole" that the US & Japan can use to avoid their domestic responsibility

AdvantagesReduction in green house gas emissionStringency in the cap or the upper threshold limit is contributing to lower emission over the years

Source of revenue for developing nationsDeveloping nations can earn revenue by selling carbon credits to countries with more fossil fuel demand.

Supports a free market systemThe carbon trade market is without any economic intervention and regulation by government except to regulate against force or fraud

Impetus for Alternative sources of energy or green technologyThreshold limits encourages industries to harness alternative sources of energy and invest in green technology globally or in indigenous research.

DisadvantagesRight to polluteIndustries in the ratified nations are purchasing legal rights to pollute the atmosphere

Slow processIndustries are opting the easy way purchase more allowances than implementing greener technologies

Lack of centralized system or global frameworkAbsence of a centralized and accepted global standards/act are missing

No effective carbon reduction in the atmosphereLeads to carbon reduction in one place and results in carbon emission in some other place

ConclusionCarbon Trading brings forth financial incentives to reduce carbon dioxide emission and implement eco-friendly/green technologies.

Stringent assignment of the caps or the upper threshold limits over the years can ameliorate the green house gas emission problem.

The alternative/renewable sources of energy like wind, solar and hydro are supposed to get financial boost to substitute fossil fuels.

Absence of a standard measuring technique in carbon sequestration or storage questions the feasibility of Carbon Offsetting techniques.

Presently, the market is primarily driven by financial interest or gains by the investment farms as opposed to seeking environmental remedy.