Presented By: Debasis Pan (10810019)

Pankaj kumar (10810041) Pravin Dwivedi (10810045)

Carbon Credit Trading Mechanism and Indian Scenario

Contents

• Introduction• Kyoto protocol (KP)• KP Mechanisms• Price Determinants of Carbon• Indian Scenario• CDM Market in India

Climate ChangeRapid Industrial Growth

Increased energy consumption

Increased CO2 and other GHG emissions

Global Warming due to increased concentration of GHG

Increasing sea level

Changes in Crop yields

Total CO2 Emissions - 1990 and 2005

UN Framework Convention on Climate Change

• 165 nations signed the 1992 United Nations Framework Convention on Climate Change (UNFCCC) at Rio de Janeiro

• The Convention divides countries into two main groups - Annex I & Non-Annex I Countries

• Annex I (developed countries) agreed to reduce their GHGs by 5.2 % below 1990 levels in 1st commitment period 2008 – 2012

UNFCCC continues..• Convention is based on three principles

– Common but differentiated responsibility– Precautionary approach– Sustainable Economic Growth and Development

• The Kyoto protocol defined how to bring down the emissions in COP 3 in 1997

COP-conference of the parties

Kyoto Protocol• Negotiated in Kyoto, Japan in December 1997, • Opened for signature on March 16, 1998, • Came into force on February 16, 2005,• Binding 'industrialized’ or 'developed’ countries,

listed in Annex 1 of the UNFCCC • Commits developed countries to specific targets for

reducing their green house emissions • Each country has a prescribed number of 'emission

units' which make up the target emission units• The Kyoto Protocol provides mechanisms for

countries to meet their emission targets

Copenhagen Deal• Conceived and organized on 6-18 Dec 2009 by

Bjorn Lomborg, then director of the Danish government's Environmental Assessment Institute

• Meant to replace Kyoto Protocol in 2013• Still no legal binding or any future sign of it• Target temperature rise is 3.6F

Carbon Credits• A carbon credit is a financial instrument that represents

a tonne of CO2 or CO2e (carbon dioxide equivalent gases) removed or reduced from the atmosphere from an emission reduction project.

• Carbon credits are measured in units of certified emission reductions (CERs).

• Each CER is equivalent to one ton of carbon dioxide reduction.

• Such a credit can be sold in the international market at a prevailing market rate.

KP Mechanism

Carbon Credit Trading Mechanism Under CDMThe CDM allows emission-reduction projects in

developing countries to earn certified emission reduction (CER) credits.

The purpose of Clean Development Mechanism (CDM) is reduce to emissions and also contribute to sustainable development in developing countries.

Typical Durations

Typical Durations

Steps in Project Cycle

Steps in Project Cycle

Entities Responsibilities

Entities Responsibilities

4-12 Weeks4-12 Weeks

6-8 Weeks6-8 Weeks

8-12 Weeks8-12 Weeks

6-12 Weeks6-12 Weeks

Projects SpecificProjects Specific

1-4 weeks1-4 weeks

6 Weeks6 Weeks

Project DesignProject Design

Host Country ApprovalHost Country Approval

ValidationValidation

RegistrationRegistration

MonitoringMonitoring

Verification & CertificationVerification & Certification

CERs Issuance CERs Issuance

Clean Development Project Process

Project Owner & CDM Consultant

Project Owner & CDM Consultant

Designed National Authority

Designed National Authority

DOE + CDM Methodology Panel

DOE + CDM Methodology Panel

CDM ExecutivesCDM Executives

Project OwnerProject Owner

Designated Operational Entity

Designated Operational Entity

CDM BoardCDM Board

Proj

ect P

lann

ing

Phas

eEx

ecuti

onRe

aliz

ation

• India 90,898,274• China 309,129,616

CER – Source of Generation

Industries like:• Manufacturing,• Energy (renewable & non-renewable sources),• Metal production,• Mining and mineral production,• Chemicals,• Afforestation & reforestation,• Transport and• Agriculture

Price Determinants of Carbon

• Policy and regulatory Issues;• Market fundamentals; and• Technical Analysis.

India Scenario

•India is a Party to the United Nations Framework Convention on Climate Change (UNFCCC)

•The Seventh Conference of Parties (COP-7) to the UNFCCC decided that Parties participating in CDM should designate a National Authority for the CDM.

•Accordingly the Central Government constituted the National Clean Development Mechanism (CDM) Authority

INDIAN SCENARIO- FAVOURING POINTS

• India - high potential of carbon credits • Wide spectrum of projects with different sizes• Vast technical human resource • Dynamic, transparent & speedy processing by Indian

DNA (NCDMA) for host country approval • MoU Signed between MoP and GIZ (Oct 2006)- Indo

German Energy program (IGEN) – Baseline CO2 Emissions from Power Sector already in

place- first CDM country – Improvement in EE – CDM in Power Sector

Indo German Energy Programme, embedded in Bureau of Energy Efficiency, Ministry of Power, Government of India is implementing "A CDM - Capacity building Programme" in partnership with Designated National Authority, Ministry of Environment and Forests, Government of India.

Funded by German Ministry of Economic Cooperation and Development through IGEN, GIZ, for a period of three years will act as a facility that can help reduce transaction cost in early market development process.

Carbon Trading in India• Multi Commodity Exchange of India Ltd. ( MCX) entered

into a strategic alliance with CCX in September 2005 to initiate carbon trading in India.

• The tie-up would provide immense scope and opportunity for domestic suppliers to realize better prices for their carbon credits.

• India being a major supplier of carbon credits, the tie-up between the two exchanges is expected to ensure better price discovery of carbon credits

CDM POTENTIAL FOR INDIA

• Sector-wise break-up

Total No. of Projects = 1578

29%

1%5%

6%

2%

35%

22%

No. of Projects

Energy Efficiency Forestry Fuel switching Industrial Process MSW Renewable Renewable (Biomass)

34%

2%10%

18%

2%

20%

14%

CERs upto 2012

Energy Efficiency Forestry Fuel switching Industrial Process MSW Renewable Renewable (Biomass)

Total No. of CERs = 633401547.39

CER POTENTIAL

Name of Sector No. Of Projects CER upto 2012

Energy Efficiency 455 217421223

Forestry 10 10411540

Fuel switching 81 61281198

Industrial Process 95 111780559

MSW 35 11526169

Renewable 547 129658846.39

Renewable (Biomass) 355 91322012

Total 1578 633401547.39

NCDMA , MoEF

CDM MARKET IN INDIA

• Fastest growing financial market – rose 80% in 2007 to reach nearly $ 60 billion - expected to be $ 1 trillion by 2009–10.

• 2007 carbon market shows China’s share at 61% and India at 12%. In terms of total CERs issued of 166 million, India has 43 million or 26%.

• In 2008, China’s share at 23% and India at 30% in terms of no of projects and 36% and 25% in terms of no of CER’s issued respectively. (13.10.08)

• An Indian firm, J.S.W Steel won the largest single CER of 5.4 million in 2 projects.

Thank You