carbon credits

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

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Page 1: Carbon credits

CARBON CREDITS

Ashish Kumar Ghosh [11312008]Neelesh Sharma [11110034]

Page 2: Carbon credits

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/

CO2MethaneNitrous Oxide

Hydroflourocarbo

nSulphur HexaflouridePerflourocarbon

Page 3: Carbon credits
Page 4: Carbon credits

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

Page 5: Carbon credits

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)

Page 6: Carbon credits

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

Page 7: Carbon credits

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.

Page 8: Carbon credits

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.

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Carbon Network

Page 10: Carbon credits

Markets for Carbon Trading

POWER NEXT

EUROPEAN CLIMATE EXCHANGE

Page 11: Carbon credits

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)’

Page 12: Carbon credits

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

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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 nationso Developing nations can earn revenue by selling carbon credits to countries with more fossil

fuel demand.

• Supports a free market systemo 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 technologyo Threshold limits encourages industries to harness alternative sources of energy and invest in

green technology globally or in indigenous research.

Page 15: Carbon credits

Disadvantages• Right to pollute

o Industries in the ratified nations are purchasing legal rights to pollute the atmosphere

• Slow processo Industries are opting the easy way– purchase more allowances than implementing

greener technologies

• Lack of centralized system or global frameworko Absence of a centralized and accepted global standards/act are missing

• No effective carbon reduction in the atmosphereo Leads to carbon reduction in one place and results in carbon emission in some other place

Page 16: Carbon credits

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.