By M.M. Namadi

Department of Chemistry

NDA Kadunaammimuktar@gmail.com

+2348034517413

Carbon Credit

IntroductionOur earth is undoubtedly warming. This

warming is largely the result of emissions of carbon dioxide and other Greenhouse Gases

(GHG’s) from human activities including industrial processes, fossil fuel combustion, and changes in land use, such as deforestation etc. Addressing climate change is not a simple task.

To protect ourselves, our economy, and our land from the adverse effects of climate

change, we must reduce emissions of carbon dioxide and other greenhouse gases. To

achieve this goal the concept of Carbon Credit has come into vogue.

Rapid Industrial Growth

Increased energy consumption

Increased CO2 and other GHG emissions

Global Warming due to increased concentration of

GHGIncrease in sea

levelChanges in windAnd precipitation

Changes in crop yields

According to the World Bank Economist Mr. Stern, the effect of climate change could be worse than the two World Wars.

Carbon credits are certificates issued to countries that reduce their emission of GHG (greenhouse gases) which causes global warming.

Carbon credits are measured in units of certified emission reductions (CERs). Each CER is equivalent to one tonne of carbon dioxide reduction.

Under IET (International Emissions Trading) mechanism, countries can trade in the international carbon credit market. Countries with surplus credits can sell the same to countries with quantified emission limitation and reduction commitments under the Kyoto Protocol.

Developed countries that have exceeded the levels can either cut down emissions, or borrow or buy carbon credits from developing countries.

What is Carbon Credit?

“A carbon credit is a generic term for any tradable certificate or permit representing the right to emit one tone of carbon dioxide or the mass of another greenhouse gas with a carbon dioxide equivalent (CO2) to one tone of carbon dioxide.”

Carbon credits and carbon markets are a component of national and international attempts to mitigate the growth in concentrations of greenhouse gases.

If a cement manufacturer reduces its CO2 emissions by one ton by adapting some changes into its process or by any other means; say just by planting some trees around its plant, it is awarded “one carbon credit”. This carbon credit can be sold to any industry, allowing it to emit one extra ton of CO2 than its allowable limit.

Nike has sold emission reduction credits equaling 100,000 tons to the utility company Entergy. Entergy has also purchased carbon credits from DuPont and Shell.

Other companies dealing in carbon credits include Expedia, Whole Foods, and Haynes International, Inc, etc

CARBON CREDITS are generated by enterprises in the developing world that shift to cleaner technologies and thereby save on energy consumption, consequently reducing their

greenhouse gas emissions. For each tonne of carbon dioxide (the major Green house gases) emission avoided, the entity can get a carbon emission certificate which they can sell either immediately or through a futures market, just

like any other commodity. The certificates are sold to entities in rich countries, like power utilities, who have

emission reduction targets to achieve and find it cheaper to buy 'offsetting' certificates rather

than do a clean-up in their own backyard.This trade is carried out under a UN-mandated international convention on climate change to

help rich countries reduce their emissions.

Global warming potential (GWP) for the 6 GHGs are summarized below

•GWP is the global warming impact that a GHG would have over a 10-year timeframe•By definition, CO2 is used as the reference benchmark.

Greenhouse gases (GHG) are components of the atmosphere that contribute to the greenhouse effect.

Some greenhouse gases occur naturally in the atmosphere, while others are the result from human activities such as burning of fossil fuels such as coal.

GHG include water vapor, carbon dioxide, methane, nitrous oxide, and ozone.

Carbon exists in the Earth's atmosphere primarily as the gas carbon dioxide (CO2). The overall atmospheric concentration of these greenhouse gases has been increasing in recent decades, contributing to global warming.

What are the needs for Credit Carbon?

The credit carbon mechanism was formalized in the Kyoto protocol, an international agreement between more than 170 countries, and the market mechanisms were agreed through the subsequent Marrakesh Accords.

The main aim of this agreement is to reduce the carbon emission in the global atmosphere to balance the natural environment.

How Carbon Credit deals with the Carbon emission reduction?

Currently there are six exchanges trading in carbon allowances: Chicago Climate Exchange European Climate Exchange NASDAQ OMX Commodities Europe Power Next Commodity Exchange Bratislava European Energy Exchange

Kyoto Protocol is an agreement made under the United Nations Framework Convention on

Climate Change (UNFCCC)The Kyoto Protocol is only binding on 'industrialized‘ or 'developed‘ countries.

The protocol commits developed countries to specific targets for reducing their green

house emissionsEach country has a prescribed number of 'emission units' which make up the target

emissionThe Kyoto Protocol provides mechanisms for

countries to meet their emission targets

KYOTO PROTOCOL

ALLOWANCEBASED

PROJECTBASED

Clean DevelopmentMechanism

(Developing &developed countries)

Joint Implementation(Between developed

countries)

InternationalEmission Trading

(Between developedcountries)

Assigned amountunits (AAU)

Carbon ReductionUnits(CER)

Emission ReductionUnits(ERU)

The mechanisms assists the parties meet their emission reduction targets.

These mechanisms are: Joint Implementation (JI) Clean Development Mechanism (CDM) Emission trading (ET).

Under CDM, an annex 1 country takes a green house gas reduction project activity in a non-annex 1 country.

The developed country gets credits for meeting its emission reduction targets, while the developing country receives the capital and clean technology to implement the project.

The parties involved: Must participate voluntarily; Must establish national CDM authority; Must have ratified the Kyoto Protocol;

World’s largest GHG emitter, has not ratified the Protocol Australia?

Short horizon: First phase of the Protocol covers up to 2012– Extension?

Country reduction targets defined, but division of that by industry and sector within countries not yet structure

Carbon sequestration can be defined as the capture and secure storage of carbon

Carbon credits encompass two ideas:

1. Prevention/reduction of carbon emissions produced by human activities from reaching the atmosphere by capturing and diverting them to secure storage

2. Removal of carbon from the atmosphere by various means and securely storing it.

Vast potential for carbon credit. Member of Kyoto Protocol, Pakistan is eligible to benefit

from the projects under Clean Development Mechanism (CDM) and exploring carbon credit potential in different industries.

The ministry has identified tremendous potential of CDM in sugar industry.

“Carbon Credit Opportunities in the Power Sector of Pakistan”

“Carbon Trading Workshop”,

High Profit of Pak Arab Fertilizers was contributed by the “Clean Development Mechanism (CDM)” project, which was achieved through sale of carbon credits in the international markets.

By means of the CDM project–the first and only such project in the country-the company has not only increased its income but also earned valuable foreign exchange for the country.

The company has managed to sell carbon credits in Japan and the European Union.

Emissions trading (ET) is a mechanism that enables countries with legally binding

emission targets to buy and sell emissions allowances among themselves.

Each country has a certain number of emission allowances (amount of carbon dioxide it can emit) in line with its Kyoto reduction targets.

The IET allows industrialized countries to trade their surplus credits on the international

carbon credit market.

Emissions trading transfers "assigned amount units" or AAU

The buyer will then use the credits to meet their emissions targets

A global Carbon Market is estimated to be around $30 billion

Currently, futures contracts in carbon credits are actively traded in the European

exchanges (ECX)Many companies actively participate to

manage the risks associated with trading in carbon credits

Technology transfer &Project financing

CDM

Carbon credits

Developed Countries Developing Countries

The purpose of CDM is reduce to emissions and also contribute to sustainable development in developing countries

The CDM is administered by the CDM Executive Board (CDM Board) which reports and is accountable to the Conference

of Parties (COP).A Carbon emission reduction (CER) is given by the CDM

Executive BoardOne CER is equivalent to one tonne of carbon dioxide reduced

Projects between industrialized nations to earn emission offsets

It is done because of geographical or cost implications

Emission reduction units (ERUs) created through joint implementation is treated in

the same way as those from emissions trading

Carbon Emission Reduction (CER) –

Source of Generation

Industries likeAgricultureEnergy (renewable & non-renewable sources)ManufacturingMetal productionMining and mineral productionChemicalsAfforestation & reforestation

ECX is the most liquid marketplace for trading CO2 EU allowances

ECX53%

OTHER8%

OTC39%

ConclusionThere is a great opportunity awaiting Nigera in carbon trading which is estimated to go up to $120 billion by 2015. If we develop

and register CDM projects, the country could emerge as one of the largest beneficiaries of

carbon trade. The countries like US, Germany, Japan and China are likely to be the biggest buyers of carbon credits which are beneficial for India to a great extent.

Conclusion cont..Thus, by going through the all the above details about carbon credit we come to know that credit carbon has both social as well as monetary benefit .As a part of nature it is our social responsibility or our duty to give our participation to keep our environment healthy and clean….

Thank you