Carbon Credits - Study

1. CARBON CREDITS
Ashish Kumar Ghosh [11312008]
Neelesh Sharma [11110034]

2. Global Warming
The Earth's average surface
temperature rose by 0.74±0.18 °C over the
period 1906–2005
Source: http://data.giss.nasa.gov/gistemp/graphs/
CO2
Methane
Nitrous Oxide
Hydroflourocarbon
Sulphur Hexaflouride
Perflourocarbon

4. UNFCCC United Nations Framework
Convention on Climate Change
Earth Summit – Rio de Janeiro June 1992
Objective: “stabilize greenhouse gas concentrations in the atmosphere at a level that would prevent
dangerous anthropogenic interference with the climate system”
May 2011 - 195 parties (all United Nations member states (except South Sudan), as well as Niue, Cook
Islands and the European Union)
• The parties to the convention have met annually from 1995 in Conferences of the Parties (COP) to
assess progress in dealing with climate change.
• In 1997, the Kyoto Protocol was concluded and established legally binding obligations for
developed countries to reduce their greenhouse gas emissions.
• The 2010 Cancún agreements state that future global warming should be limited to below 2.0 °C
(3.6 °F) relative to the pre-industrial level.
• The 20th COP will take place in Peru in 2014

5. Kyoto Protocol
• The 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 investments
• India 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)

6. Carbon Trading
• Cap and Trade Program
• Carbon 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

7. Cap and Trade
• CAP 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 dioxide
• TRADE The transfer or trade of allowances
o Excess or unused allowances/credits can be traded to the countries whose emissions
have exceeded their assigned cap.
o 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.

8. Carbon Offsetting
• Offset 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.

9. Carbon Network

10. Markets for Carbon Trading
POWER NEXT
EUROPEAN CLIMATE
EXCHANGE

11. Kyoto Mechanisms
• Emissions 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 units’
• Joint 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.
o The developed country would be given credits for meeting its emission reduction targets,
o while the developing country would receive the capital investment and clean technology or
beneficial change in land use.
‘certified emission reduction (CER)’

12. Emission Trading v/s Carbon Taxes
• United 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

14. Advantages
• Reduction in green house gas emission
o Stringency in the cap or the upper threshold limit is contributing to lower emission
over the years
• Source of revenue for developing nations
o Developing nations can earn revenue by selling carbon credits to countries with
more fossil fuel demand.
• Supports a free market system
o The 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 technology
o Threshold limits encourages industries to harness alternative sources of energy and
invest in green technology globally or in indigenous research.

15. Disadvantages
• Right to pollute
o Industries in the ratified nations are purchasing legal rights to pollute the atmosphere
• Slow process
o Industries are opting the easy way– purchase more allowances than implementing
greener technologies
• Lack of centralized system or global framework
o Absence of a centralized and accepted global standards/act are missing
• No effective carbon reduction in the atmosphere
o Leads to carbon reduction in one place and results in carbon emission in some other
place

16. Conclusion
• Carbon 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.