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  • Hi friends, today we would like to take this opportunity to help you understand some terms better – like…..GW, GH, CC, Kyoto, IPCC, COP-15 Copenhagen
  • For that, we would like to talk about…
  • …… .and ya, when we say talk, we expect participation from you guys too. This not intended to be a speech or lecture, but a discussion.
  • At times, don’t we feel like Suzie in above cartoon? There’s so much “noise” around all these. But why?
  • Even as we talk, something somewhere is changing.
  • human activities including industrial processes, fossil fuel combustion, and changes in land use, such as deforestation result in emissions of carbon dioxide and other greenhouse gases. Industry, transport, and the commercial sector produce the bulk of our country's emissions, around 75 percent. We individuals have a valid and vital role to play at home and work, and through our personal transport.
  • The % of CO2 in atmosphere is constantly rising, and is expected to reach .085% by year 2100
  • If we look at an even longer timeline, we would see that the rise has been quite steep during the last century. Irony is that we have also witnessed most of the technological advancements during the same period.
  • There are two kinds of GHGs, natural & made. The natural gases include water vapour, carbon dioxide, methane & nitrous oxide. In fact, some warming is essential for earth. Without a natural greenhouse effect, the temperature of the Earth would be about zero degrees F (-18°C) instead of its present 57°F (14°C). So, the concern is not with greenhouse effect or GHGs per se, but whether human activities are substantially enhancing the greenhouse effect.
  • The six greenhouse gases specified in the Kyoto Protocol are: Carbon dioxide (CO2) Methane (CH4) Nitrous oxide (N20) Hydrofluorocarbons (HFCs) Perfluorocarbons (PFCs) Sulphur hexafluoride (SF6) Approximately 25 other gases, such as chloroform and carbon monoxide, qualify as climate-changing greenhouse gases, but only the above mentioned six are released in sufficient quantities to justify regulation under Kyoto. Water vapour is a very important greenhouse gas, but is not controllable by human intervention.
  • GHGs restrict & re-emit the terrestrial radiation emitted from earth, preventing radiation to escape through atmosphere in outer space. This Green House Effect causes general warming of the earth, which, in higher concentration results in global warming or rising of the temperature to threatening level.
  • Projections of future warming suggest a global increase of 2.5ºF (1.4ºC) to 10.4ºF (5.8ºC) by 2100. 
  • Due to rise in temperatures, the ice in glacier’s is melting….and the water thus released flows in to oceans &seas thru rivers. This is leading to a rise in sea level. This poses immediate threat to islands & other costal areas. They would get submerged if sea level rises.
  • This might be good news for some….., but not for us – humans.
  • This is further substantiated by findings of IPCC. Did I hear IPCC who? Wait for a while, we will tell you in a bit.
  • And ya, we are not the only ones worried about rise in temperatures.
  • Apart from GHGs & Temperature rise, we have had other issues with environment being affected due to human acts.
  • Ozone – is a color less gas which absorbs harmful components of sunlight
  • Use of CFC’s (found mainly in refrigation units) is depleting ozone in stratosphere. There are some areas where ozone concetration has dipped below historic lows of 220 dobson units.
  • As we observe from these pictures, the ozone hole has grown unabated during 80’s & 90’s. This continues even today. In fact, the largest ozone hole ever observed occurred on 24 September 2006. The daily maximum ozone hole area for 2009 was 24 million km2 on 17 September . The daily mininum ozone value for 2009 was 94 DU on 26 September .
  • Acid rain is another man-made problem.
  • The acidic gases released in atmosphere by polluting industries are carried around by the wind. These gases then dissolve in rainwater to forma acid rain, which kills plantlife, erodes stonework & causes damages to mankind.
  • Scientists first discovered acid rain in 1852, when the English chemist Robert Agnus invented the term. It is caused by airborne acidic pollutants and has highly destructive results. From then until now, acid rain has been an issue of intense debate among scientists and policy makers.
  • So what are we doing to tackle these problems?
  • But before that, we would like to know Climate is whose responsibility.
  • Most of the organisation are & would be concerned with their bottomline. Even we expect big businesses to act & help us find a way out. But that’s just a myth.
  • Even an internet powerhouse is under attack for having a white homepage. It is widely believed that a black homepage for google would help save 750 megawatts hous every year. an all white web page uses about 74 watts to display, while an all black page uses only 59 watts.
  • But lets not forget, 60% of businesses qualify as small. That’s quite a large number. And a force to reckon with when put together.
  • But they tend to undermine themselves
  • It is very rightly said that businesses have a key role to play in tackling social problems. But we as managers believe that what is good for environment is not good for business. This not the case in reality. Later in this presentation, we would see how businesses benefit by addressing a social cause.
  • The businesses need to act responsibly & reduce their carbon foot print. There’s a treasure waiting to be unlocked.
  • While on carbon footprint, lets talk about geographical diversity in terms of GHG emissions. The redder the area is, more is the concentration of CO2 in that area. And as discussed earlier, that means more severe is the problem of climate change in that area. http://en.wikipedia.org/wiki/Image:GHG_per_capita_2000.svg
  • http://en.wikipedia.org/wiki/Image:Carbon_Emission_by_Region.png To give another perspective, lets study the regional growth of carbon emissions. We would notice that USA & Cananda have the highest emissions. This is in line with the earlier image which had USA in red. Another key point to take note of here is the rise in developing economies like China & India – Orange & Green lines. Notice the steep incline?
  • Ok, by now we all have a fair idea of what problem is & what harm it can do in future. Now lets try & see what’s our contribution to this.
  • Here’s a simple exercise. Put in the figures required above. What’s the area of ur house? How many kms do u drive in a year. Aprox how many miles do u fly in a year. Total it up.
  • What’s d result? Now jst multiply it by 7 billion (~global population). This would give you a rough estimate of amount of damage being done to environment. But don’t worry. Awareness is the key to survival. If we act responsibly, we can undo the damage.
  • Together, we can prevent the damage. & in the process, earn some financial rewards too.
  • But the problem is that we would rather wait for our leaders to act, than do something ourselves.
  • Some early successes like montreal protocol which helped reduce CFC’s boost our faith in our leaders. If they have controlled the ozone hole, they can also deal with climate change.
  • Under Montreal Protocl, CFCs are to be phased out completely.
  • This is expected to help increase the concentration of ozone, and bring it to desirable levels.
  • Another successful govt program we can talk about is US Acid rain program. It helped reduce levels of acidic gases like sulfur dioxide. Also note that this was one of the first “cap-and-trade” program. Its success prompted more such schemes which we will discuss in detail a while later.
  • Electric power generation = 70% of SO2 emissions. Phase I concerns mostly coal-fired power plants. Beginning of Phase II : bring fossil-fuel electric power plants in the scheme. Annual allocations . Number of allowances related to the share of heat input [=combustion of fossil fuel (coal, oil, natural gas) for electricity generation] . Bonuses under a variety of provisions. Auction limited to 3% of total allowances (good indication of the value of allowances at the beginning) . Penalty adjusted for inflation (around $3,000 in 2004).
  • Reduction in emissions of acidic gases would directly reduce the harmful effects on plantation & mankind.
  • The effectiveness of US Acid rain program is reflected in reduction of red area in the above 2 pics.
  • Now to talk about what all the political machinary has done as yet for the environment, I would like to invite Neeraj Neeraj – The table given above divides the developments in to 5 continous blocks. 1979 was when the 1 st formal meeting happened to address the climate change on an international level. Thereafter IPCC was formed in 1988 to study on the subject. This was followed by COP-1 in 1995 at Berlin. The Conference of the Parties (COP) is the "supreme body" of the Convention, that is, its highest decision-making authority. It is an association of all the countries that are Parties to the Convention. The COP is responsible for keeping international efforts to address climate change on track. It reviews the implementation of the Convention and examines the commitments of Parties in light of the Convention’s objective, new scientific findings and experience gained in implementing climate change policies. As yet, most meaningful of all COPs has been COP-3 which helped in creation of Kyoto protocol. The Kyoto Protocol is an international agreement linked to the United Nations Framework Convention on Climate Change. The major feature of the Kyoto Protocol is that it sets binding targets for 37 industrialized countries and the European community for reducing greenhouse gas (GHG) emissions .These amount to an average of five per cent against 1990 levels over the five-year period 2008-2012. The Kyoto Protocol was adopted in Kyoto, Japan, on 11 December 1997 and entered into force on 16 February 2005. 184 Parties of the Convention have ratified its Protocol to date.
  • Here’s a list of various agencies working on achieving that much-needed reduction.
  • The idea behind Kyoto protocol is that by bringing emissions 7% below 1990 levels we can actually manage to reduce emissions by 30% of what it could have been had the growth continued unabated.
  • The major distinction between the Protocol and the Convention is that while the Convention encouraged industrialised countries to stabilize GHG emissions, the Protocol commits them to do so.
  • Note :1: Basically, the real difference between the Framework Convention and the Kyoto Protocol is that the Convention encouraged these countries to stabilize their emissions levels whereas, the Protocol will commit them to reducing their collective emissions by at least 5% below 1990 levels. Moreover, unlike the Convention’s non-binding aim for stabilization of greenhouse gas emissions, the Protocol’s commitments are in fact, legally-binding, which implies consequences for non-compliance.
  • The detailed rules for the implementation of the Protocol were adopted at COP 7 in Marrakesh in 2001, and are called the “Marrakesh Accords.”
  • The carbon offset is a consumer product that you or I could buy, enabling us to mildly compensate for our greenhouse-gas emissions by supporting renewable-energy projects. You know, "I'm sorry I'm repeatedly choosing to break your leg, let me apologize by funding medical training in Zimbabwe."
  • The carbon credit, on the other hand, is an aspect of the industrial "cap-and-trade" program and works slightly differently than the offset. Very broadly, the concept behind cap-and-trade is this: The government decides upon a "cap," a maximum amount of emissions allowed across an industry or sector. The cap should be lower than the status quo. Said government then issues permits to pollute, either by giving them away or by auctioning them off. Then the "trade" aspect begins. The permits each allow a certain amount of pollution. If a business can reduce its emissions and end up with extra permits, it can sell those permits for a profit to businesses that want to/must pollute more than they are allowed. The polluters, for their part, can choose to pay for permits or find technical innovations that will bring down their emissions. Ideally, the market price of permits -- a desirable but limited resource -- rises and becomes increasingly prohibitive. In this dreamy scenario, buying a permit becomes more expensive than conservation, and businesses spend the money on retrofitting their systems instead.
  • The "cap-and-trade" system is one of two large-scale greenhouse-gas reduction schemes on the global table, and the more popular. The other is a carbon tax .
  • Another key point to note here is the increase in prices of offset

Presentationv1 Part1 Presentationv1 Part1 Presentation Transcript

  • A Layman’s guide… to and lots more….
  • The team
    • Abhishek Mago S- 1
    • Divy Kumar Saini N-16
    • Eshwar Subramaniam S-20
    • K. Beji George S-26
    • Neeraj Chowdhary S-37
    • Nitin Aggrawal N-32
    • Rakesh Kumar Jha N-46
    • Vinod Kumar N-67
  • We are going to talk about:
    • Global warming
        • How / Why
        • Danger?
    • What are we doing about it:
        • IPCC
        • COP’s
          • Kyoto
          • Marrakech Accords
          • Multilateral Carbon Credit Fund
    • Carbon credit(s)
        • Mechanism
        • Pricing
        • Avenues for Earning
        • Importance
        • Financial Impact on Developing Countries
    Contd…
  • We are going to talk about:
    • What’s happening today
        • Copenhagen
        • India perspective
    • The other view
        • too little
        • too late
        • reality check
    • What it holds for us
    • Some trivia
    Contd…
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  • CO2 Rising
    • CO2 levels
    • 1830 0.028 %
    • 0.038%
    • 0.0005 % ^ annual
    • 0.085%
    www.beckstrom.com
  • Long Term Trend www.beckstrom.com So what???
  • Green House Effect
  • Greenhouse Gases CH4 CO2 PFCs HFCs SF6 310x 11,000 x 12,000 x 19 x CO2 Equivalent is Gold Standard 22,000 x N20
  • What is Global Warming?
    • refers to an increase in mean average temperature of earth’s atmosphere.
    • is an aftereffect of over concentration of Green House Gases (GHGs) in atmosphere.
  • Temperature Rising
  • According to the NASA satellite data: - “More than 2 trillion tons of land ice in Greenland, Antarctic and Alaska have melted since 2003″. - “Water melting from Greenland in the past five years would fill about 11 Chesapeake Bays and the Greenland melt seems to be accelerating.”
  •  
  • “ Climate Change 2007”, the IPCC Fourth Assessment Report (AR4), is about to be released, stand by for a tsunami of doom. Source: http://www.anenglishmanscastle.com/archives/004868.html
  •  
  • Other Global Problems
    • Ozone hole
    • Acid Rain
  • What is Ozone?
    • a colorless gas.
    • Chemically, ozone is very active; it reacts readily with a great many other substances. Near the Earth’s surface, those reactions cause rubber to crack, hurt plant life, and damage people’s lung tissues.
    • But ozone also absorbs harmful components of sunlight , known as “ultraviolet B”, or “UV-B”. High above the surface, above even the weather systems, a tenuous layer of ozone gas absorbs UV-B, protecting living things below.
    • Dobson Unit is the most common unit for measuring ozone concentration.
  • What is ozone hole?
    • not technically a “hole” where no ozone is present, but is actually a region of exceptionally depleted ozone in the stratosphere over the Antarctic that happens at the beginning of Southern Hemisphere spring (August–October).
    • is caused by chemicals called CFCs , short for chlorofluorocarbons.
    • total column ozone values of less than 220 Dobson Units were not observed prior to 1979.
    • a total column ozone level of less than 220 Dobson Units is a result of catalyzed ozone loss from chlorine and bromine compounds. For these reasons, we use 220 Dobson Units as the boundary of the region representing ozone loss.
  • Ozone Hole September 24, 2006
  • Acid Rain Acid Rain
  •  
  • What is acid rain?
    • refers to what scientists call acid deposition.
    • caused by airborne acidic pollutants and has highly destructive results.
    • one of the most important environmental problems of all, cannot be seen. The invisible gases that cause acid rain usually come from automobiles or coal-burning power plants.
    • moves easily, affecting locations far beyond those that let out the pollution.
    • can have harmful effects on plants, aquatic animals , and infrastructure through the process of wet deposition.
  • We are going to talk about:
    • Global warming
        • How / Why
        • Danger?
    • What are we doing about it:
        • IPCC
        • COP’s
          • Kyoto
          • Marrakech Accords
          • Multilateral Carbon Credit Fund
    • Carbon credit(s)
        • Mechanism
        • Pricing
        • Avenues for Earning
        • Importance
        • Financial Impact on Developing Countries
  •  
  •  
  • Blackle saves energy because the screen is predominantly black. "Image displayed is primarily a function of the user's color settings and desktop graphics, as well as the color and size of open application windows; a given monitor requires more power to display a white (or light) screen than a black (or dark) screen. " Roberson et al, 2002
  •  
  •  
  •  
  •  
  • Per Capita Footprints
  • Where is it Coming From? Prepared by Robert A Rohde Data source: Carbon Dioxide Information Analysis Center
  • Let’s Get Personal
  • Size Your Carbon Footprint CALCULATE YOUR PERSONAL CARBON FOOTPRINT Home sq. feet (00) ____ x .6 = _______ You drive kms (000) ____ x .4 = _______ You fly miles (000) ____ x .3 = _______ Your Total Tons ________
  • Question How large is your personal carbon footprint? 1) 15 2) 25 3) 50 4) 100+ tons The danger is real, but WE can control the situation….
  • Mission Po $$ ible !
  •  
  • Legislations have saved us before
    • Montreal Protocol
    “ Perhaps the single most successful international agreement to date has been the Montreal Protocol.”   -Kofi Annan, Former Secretary General of the United Nations
  • Montreal Protocol
    • Treaty originally signed in 1987 & amended in 1990 & 1992.
    • Stipulates that CFCs ,CCL4,methyl chloroform are to be phased out completely.
    • Developed nations- cfcs phase out mandatory till 1996.
    • Developing nations- can continue to produce & purchase CFCs for use till 2010 & methyl chloroform till 2015.
  • Montreal Protocol
    • If international agreement is adhered to, ozone layer expected to recover by 2050
    • Multilateral fund was established for its implementation.
    • Atmospheric conc. Of cfcs have leveled off or decreased. Conc. Of HFCs has increased substantially.
    • Reports of smuggling of CFCS from underdeveloped nations, but overall compliance has been high.
    • Currently calls for a complete phase out by 2030.
  • US Acid Rain Program
    • The Acid Rain Program is a market-based initiative taken by the United States Environmental Protection Agency in an effort to reduce overall atmospheric levels of sulfur dioxide and nitrogen oxides, which cause acid rain
    • The program is an implementation of emissions trading that primarily targets coal-burning power plants, allowing them to buy and sell emission permits (called "allowances") according to individual needs and costs
    • Phase I: units cut SO 2 emissions by 50% below 1980 levels by 20 1 0 (10 M tons).
    • Est. 1990, legally binding in 1995.
    • Grandfathering (baseline period 85-87) .
    • Limited auctioning ( 3% of total allowance ) .
    • Banking allowed. Penalty $2,000/ton.
    • Phase II units started on 01/01/ 2000.
    US Acid Rain Program-Highlights
  • Highlights ( 2 )
    • Significant emissions reductions achieved b y 2004 (7 M. tons according to EPA) .
    • Banking > 7.5 M. tons by 2004 .
    • Trading > 15 M. tons in 2004 .
    • Estimated cost-savings (relative to C&C): $1 billion / year.
    • Reduced human risk of premature mortality :
    • (EPA reports a 40-to-1 benefit to cost ratio).
  • Acid Rain Acid Rain Declines Because of Successful SO2 Reductions Market www.beckstrom.com
  • The Developments so far 1997: COP-3 -- The Kyoto Protocol Period The paradigm Key outcomes 1: Before 1990 Framing the problem 1979: First World Climate Conference 1988: Toronto Conference; Establishment of IPCC 1989: High level political conferences 1990: Second World Climate Conference; First Assessment Report of IPCC 2: 1991-1996 Leadership articulated 1992: Climate Change Convention 1995: COP-1 -- Berlin Mandate; AIJ 1996: Second Assessment Report of IPCC 3: 1997-2001 Conditional leadership 1997: COP-3 -- The Kyoto Protocol 2000: Third Assessment Report of IPCC 2001: COP-7 -- The Marrakech Accords 2001: US withdraws from Kyoto 4: 2002-2007 Leadership competition … ....: US initiates many agreements 2005: Kyoto enters into force 2007: COP-13-- Bali Roadmap 5: Post 2008 Developing countries taking lead? 2008: Global recession starts 2009: COP-15 -- Copenhagen agreement?
  • Work in progress…
    • Intergovernmental Panel on Climate Change (IPCC)
    • United Nations Framework Convention on Climate Change (UNFCCC)
    • North & South agree to mitigate climate change before “ it is too late”
    • Agree that they have “ Common but Differentiated responsibilities ”.
    • Kyoto Protocol which in details describe how the GHGs can be reduced entered into force on 16th February 2005.
  • IPCC As an intergovernmental body the IPCC is open to all member countries of the World Meteorological Organisation (WMO) and the United Nations Environment Programme (UNEP). Its activities are guided by the mandate given to it by its parent organisations WMO and UNEP and governed by principles agreed by the Panel. The work-programme of the IPCC is decided by the Panel in plenary Sessions.
  • Kyoto - Multiplier Effect X -7% = O
    • Emissions
    • Time
    -7% = -30%
  • Commitments: General
    • All Parties to the Protocol are subject to a set of general commitments that mirror those of the Framework Convention.
    • These include:
    • Taking steps to improve the quality of emissions data.
    • Promoting environmentally-friendly technology transfer.
    • Supporting climate change education, training and public awareness.
    • Cooperating on international climate observation.
  • Commitments: Specific
    • At the real heart of the Kyoto Protocol lies its set of legally-binding emissions targets for industrialized countries. These emissions targets amount to a total cut, among all Annex I Parties, of at least 5% from 1990 levels by 2008-2012.
  • Kyoto Protocol
    • It relies on market based flexible mechanisms to reduce GHGs emissions to mitigate GW.
      • Emission trading (trading of allowances between Annex I governments)
      • Clean Development Mechanism (CDM) (projects in Non-Annex I countries with participation of Annex I countries)
      • Joint Implementation (JI) (projects between Annex I countries)
  • Carbon Credits - also Known as…
    • Emission reduction unit (ERUs),
    • Certified emission reduction (CERs),
    • Assigned amount unit (AAUs)
    • Removal unit (RMUs)
    • Voluntary emission reduction (VERs)
  • Generating Carbon Credits GHG emissions Time Project commissioned “ With project” emission level “ Without project” emission level Carbon credits Project based emission reductions need to be calculated and verified 1 reduced Ton of Carbon Dioxide equivalent = 1 Carbon Credit hereafter they can be sold on the open market.
  • Marrakech Accords (Decision 4/CP.7)
    • The Marrakech Accords is a set of agreements reached at the Conference of the Parties 7 (COP7) meeting in 2001 on the rules of meeting the targets set out in the Kyoto Protocol.
    • Decides to adopt the framework for meaningful and effective actions to enhance the implementation of Article 4.5 of the Convention
    • Decides to establish an expert group on technology transfer
  • Marrakech Accords
    • Detailed definitions and rules for each element of the Kyoto Protocol
    • Agreement on compliance process and penalties, final decision on “binding” nature of compliance delayed until after ratification
    • Includes use of sinks (forest, cropland, and grazing land management, and revegetation are eligible activities)
    • No quantitative cap on the use of flexible mechanisms (emissions trading, CDM, joint implementation)
  • Multilateral Carbon Credit Fund
    • Established by the European Investment Bank (EIB) and the European Bank for Reconstruction and Development (EBRD).
    • Participants: Six countries and six private companies
      • Belgium (Flanders), Finland, Ireland, Luxembourg, Spain, Sweden
      • Abengoa (Spain), ČEZ (Czech Republic), Gas Natural (Spain), Endesa (Spain), PPC (Greece), and Union Fenosa (Spain).
    • Total of €165-million for 3 zones across Central Europe and Central Asia (€150 mln for projects, €15 mln for Green Investment Schemes)
    • MCCF helps Participants to meet their mandatory or voluntary greenhouse gas emission reduction targets by purchasing carbon credits (EAUs, CERs, ERUs and AAUs) from projects financed by the EBRD and/or EIB
    • The negotiation, contracting and monitoring of carbon credit transactions outsourced to private “Carbon Managers”
  • Objectives of the MCCF
    • Procure quality, low-cost credits from Countries in Transition (CEE and CIS)
    • Increase investment flows in low-carbon technologies
    • Support the development of emission trading
    • Promote dissemination of best practices through policy dialogue
  • Added Value of the MCCF
    • A multilateral initiative
      • Political weight and clout
      • Capacity for engaging Governments (Policy Dialogue)
      • Risk mitigation through size and diversification
    • Benefits from EBRD-EIB involvement
      • Political comfort
      • Quality of emission reduction projects and size of pipeline
      • Unique knowledge of, and presence in, the region
      • Experience from Dutch JI Fund (EBRD)
      • Experience with managing multi-donor funds (EBRD)
    • Region has largest potential for low-cost credits
      • Vast opportunities for JI and CDM projects
      • Surplus AAUs in Russia, Ukraine, etc
    • Types of projects which can be handled
      • Renewable energy projects, fuel switch, energy efficiency, waste processing, etc.
  • We are going to talk about:
    • Global warming
        • How / Why
        • Danger?
    • What are we doing about it:
        • IPCC
        • COP’s
          • Kyoto
          • Marrakech Accords
          • Multilateral Carbon Credit Fund
    • Carbon credit(s)
        • Mechanism
        • Pricing
        • Avenues for Earning
        • Importance
        • Financial Impact on Developing Countries
  • Kyoto again
    • Protocol put a cap on emissions
    • Developed countries that have exceeded the levels can either cut down emissions, or borrow or buy carbon credits from developing countries.
    • Such a credit can be sold in the international market.
    • The trading can take place in open market.
  • Carbon Offset
    • is a financial instrument aimed at a reduction in greenhouse gas emissions.
    • are measured in metric tons of carbon dioxide-equivalent (CO2e) and may represent six primary categories of greenhouse gases.
    • One carbon offset represents the reduction of one metric ton of carbon dioxide or its equivalent in other greenhouse gases.
    • has gained some appeal and momentum among consumers who have become aware and concerned about the potentially negative environmental effects of energy-intensive lifestyles and economies.
    • The Kyoto Protocol has sanctioned offsets as a way to earn carbon credits.
  •  
  • Carbon Credits
    • sometimes called “cap & trade regimes”
    • wherein participants can emit a set amount of carbon dioxide over the course of a given time period.
    • emit less than that, they can sell their remaining credits to those unable to get emissions down to the capped level;
    • CO2 producers unable to meet the limits and unable to buy credits are penalized.
    • Caps go down over time.
  • Carbon Tax
    • is an environmental tax on emissions of carbon dioxide (CO2).
    • can be implemented by taxing the burning of fossil fuels—coal, petroleum products such as gasoline and aviation fuel, and natural gas—in proportion to their carbon content.
    • If CO2 emissions are not released into the atmosphere on combustion of fossil fuels, e.g., carbon capture and storage, then a carbon tax will not apply.
    • increases the competitiveness of low-carbon technologies, such as renewables, compared to the traditional burning of fossil fuels.
    • Unlike a cap system with grandfathered permits, a carbon tax raise revenues. Carbon taxes provide price certainty on emissions, while a cap provides quantity certainty on emissions.
  • Clean Development Mechanism (CDM)
    • The Clean Development Mechanism of the Kyoto Protocol defines a series of steps necessary to develop certified emissions reductions (CERs):
        • Project Design
        • Project Validation
        • Host Country Approval
        • Registration with the CDM Executive Board
        • Implementation and Monitoring
        • Verification/Certification and Issuance of CERs
        • Sale of CERs
    Read more at http://www.co2biz.info/carbon-credit-trading/cdm/
  • How it works? By selling the emission reductions from a project to a Annex I party additional cash flows can be realised. Emission cap Actual emissions Buyer Carbon Credits Carbon value Annex I party Emission reduction project The CDM project reduces the carbon emissions in the CDM country
  •  
  • Carbon Credits - benefits
    • provide an additional source of revenue;
    • improves the return on their investments;
    • boost the economic feasibility of projects;
    • and
    • accelerate project implementation.
  • Impact on the IRR of The Project IRR Benchmark Project return excluding CDM revenue Project return including CDM revenue CDM cash flow The gap between the project return and the required return on investment threshold The CDM cash flow increases the IRR of the project making it more interesting for investors. (2%-100%, diversification, offshore revenue stream) 12 % 15 % 16 %
  • Baselines
    • is a scenario in which one provides supporting evidence about what the emission of greenhouse gases would be until 2012 without this investment.
    • compare this baseline with the lower emission that will be achieved through this investment.
    • difference between baseline & lower emission is the amount of saleable carbon credits.
    • In the case of JI projects one can only sell the reduction achieved between 2008 and 2012 and not what is achieved in the previous years or years after.
    • Louis Redshaw, founded carbon emissions trading
    • In 2004, met with five investment bankers to discuss the possibility of trading carbon dioxide as a means to reduce harmful greenhouse gases into the air
    • Barclays Capital was the only bank interested in his venture
    • Currently, this market is worth more than $30 billion and is expected to grow to $1 trillion within the next ten years
    • Investment banks are expanding carbon business rapidly
    • Hedge funds and some private equity funds, as well as emerging niche investments banks are now pursuing carbon emissions trading very seriously. 
    Carbon Emission Trading
    • The concept of Carbon Credit trading seeks to encourage countries to reduce their GHG emission, as it rewards those countries which meet their targets and provides financial incentives to others to do so
    • Surplus credits (collected by overshooting the emission reduction target) can be sold in the global market
    • One credit is equivalent to one tonne of carbon dioxide emission reduced. CC is available for companies engaged in developing renewable energy projects that offset the use of fossil fuels.
    Carbon Emission Trading
  • Key Price determinants
    • Risk allocation
    • Creditworthiness & experience of project sponsor
    • Viability of underlying project
    • Contract structure (e.g. upfront payments incur discount, penalties for non-delivery, ability to pay penalties)
    • Cost of validation & potential certification
    • Host country support & willingness to cooperate
    • Additional environment and social benefits
  • CE Trading – Market Trends
    • The amount of carbon dioxide equivalent (CO2e) being traded globally in 2009 would value at USD 157 billion.
    • The global carbon market that has been growing by 105 per cent and 84 per cent in 2007 and 2008 respectively.
    • India is expected to be one of the top three largest players in the Carbon Credits market by 2010 end where business is estimated to grow by US$ 5 billion.
    • The average annual Certified Emission Reduction (CERs) from registered projects during July 2008 to February 2009 grew by 20.92 per cent from 218,345,930 to 264,022,976 respectively.
    • $ 60 Billion was the size of the global carbon credit market in 2007.
    • The average price paid to offset one tonne of CO2 or equivalent GHGs rose 49% from 2006 to 2007.
    • The percentage of projects sourced from Asia nearly doubled, from 22% in 2006 to 39% in 2007.
    • More than 3.6 million CER’s registered.
    • Of the 93 CDM projects registered, 23 are from India.
    • Almost 50% of projects in the pipeline are from India.
    • Over 75% of India’s CDM potential lies in the energy sector.
    • By 2012 Indian companies are expected to generate at least US$ 8.5 billion
    CE Trading – Market Trends http://www.co2biz.info/carbon-credit-trading/market-trends/
  • Rising prices - benefits
    • it will provide signals to consumers about what goods and services are high-carbon ones and should therefore be used more sparingly.
    • it will provide signals to producers about which inputs use more carbon (such as coal and oil) and which use less or none (such as natural gas or nuclear power), thereby inducing firms to substitute low-carbon inputs.
    • it will give market incentives for inventors and innovators to develop and introduce low-carbon products and processes that can replace the current generation of technologies.
    • and most important, a high carbon price will economize on the information that is required to do all three of these tasks.
    Through the market mechanism, a high carbon price will raise the price of products according to their carbon content.
  • Current CER pricing