PROF. M.K.GHADOLIYADIRECTOR (ACADEMIC)

V.M.OPEN UNIVERSITY, KOTA

GREEN ECONOMICS

Structure of the economy Conventional Economics

Necessities: water, food, energy, housing, Index of sustainable waste management economic welfare

Land tax

Distribution, trade, tool manufacture

Administration and Public services

Financial services Central point

Money Gross Domestic Product

IntrodictionIntrodiction

Green economics Includes the eco-logical and environmental impact in addition to the

economical impact of a transaction

Includes externalities ignored by conventional economics Basic Axioms: It is impossible to expand forever into a finite space. It is impossible to take forever from a finite resource. Everything on the surface of the Earth is interconnected. Conventional growth is delusional Money

consumer firm

Consumption Product Production External cost or Benefit External cost

or Benefit3rd PartyInvoluntary costs free Benefits

Green Economics

Resources

Resource action/work Wealth

Finite Resources and Renewable Resources.

Green Economics

Internalizing costs Resource tax: Cost of using finite resources, and cost

towards development of renewable sources of energy The polluter pays principle: a tax built into the cost

of a product or processes having impact on environment and human health

Producer responsibility: Cost of research to find out the effect of a process or a product have and cost of neutralizing these effects

Positive inducements: Tax breaks etc. Tradable credits: A form of rationing. Use your

credits or put it in the market to trade

Green Economics

Work Enlisted amongst top in the list of

activities that bring happiness

Good work can be stimulated in absence of money

Use credit instead of money

Green Economics

In effect Cap-and-trade system – Green house gas (GHG) emission reduction (baseline and credit) If exceed the cap Pay ‘carbon tax’ Purchase carbon credits through emission trading schemes Invest in carbon project – Gets funding because of the resulting reduction in the GHGs. Resulting emissions reductions may become Certified Emissions Reductions (CERs), which can be traded in the future Offset its excess emission by emission reduction through carbon project

Green Economics

Emission trading: Major systems Kyoto Protocol – 1995 international treaty, effective 2005 United States – Clean air act (1990), Regional greenhouse

gas initiative (NY state), Chicago climate exchange European Union – EU ETS Largest of such schemes created along with Kyoto protocol. Caps CO2 productions from large installations Covers half of the EU’s CO2 emissions Australia – Australian carbon trading scheme Green tags (REC) – Positive incentive for renewable energy

provider

Kyoto Protocol

Kyoto Protocol

Kyoto protocol Aimed at reduction of GHGs in view of international climate change Assigns mandatory emission limitations to the signatory nations. Developed (Annex I) countries: Required to reduce their GHG

emission compared to that in 1990 Developing (Annex II) countries: Not required to reduce their

emissions but participate in CDM Reduce collective GHG emissions by 5.2% compared to the year 1990

(which is 29% less compared to the expected emission levels in 2010 in

absence of the protocol)

Kyoto ProtocolClean Development Mechanism (CDM) Allows Annex I countries to invest in projects

reducing emissions in developing countries as an alternative to more expensive emission reductions in their own countries.

Joint implementation (JI) Allows collaboration with other Annex I countries

Green Economics

Carbon emission trading: Tit-bits In 2005, 374 million metric tonnes of carbon

dioxide equivalent (tCO2e) were exchanged through projects in 2005 240% increase relative to 2004

Centre for carbon trading London financial market Emission trading an important market based

solution to address climate change problem Collective initiative by NGO’s, companies and

government – economical growth while preserving environment

India and China Indian companies have earned $500 million from carbon-creditsales, in last two years (Ernst & Young). I CERs : India - 43%, China -17% (of the total issued by CDMexecutive board) Projects : India – 259, China -101 Expected average annual income : India -15%, China - 44%

All is not green Tricky implementation

May be cheaper to corrupt entities distribution licenses than to purchase licenses legally

Issuance of surplus of credits Difficult administration

Actual effect on the environment is dubious Market instability Taxes are predictable

Few notables Walmart’s massive initiative Reduce energy consumption of existing stores by 20% and other’s by 30% in 7 years Simple solutions to reduce energy for heating, refrigeration and lighting

Sets an example for other enterprises

Brazil Every gas station is required to carry ethanol (made fromagricultural products), 85% flexible-fuel cars

THANK YOU!