Green house gases
one tonne of CO2
Birth of UNFCCC
In 1992, Rio Brazil
Green House Gases should be
stabilized within a time frame.
An agreement signed in
December 1997 in Kyoto,
• Protocol adopted under the UNFCCC( United Nations Framework
Convention on Climate Change) in 1997, and came into effect in 2005.
Countries were segregated into 3 categories- Annex I, Annex II and NonAnnex I.
Annex I comprises of 41 countries, industrialized countries and economies in
transition. The target specified is to reduce GHG emission from 1990 level
Annex II comprises of 21 countries which are a subset of Annex I part of
OECD(Organization for Economic Co-operation and Development). They
have additional targets of reducing GHG emissions in developing countries.
Non Annex I comprises of 145 countries, which don’t have any target
specific goals according to the Protocol, but have to decrease the carbon
A carbon credit is a generic term for any tradable certificate or
permit representing the right to emit one tonne of carbon dioxide
or the mass of another green house gas equivalent to one tonne of
The goal is to allow market mechanisms to drive industrial and
commercial processes in the direction of low emissions or less
carbon intensive approaches than those used when there is no cost
to emitting carbon dioxide and other GHGs into the atmosphere.
Since GHG mitigation projects generate credits, this approach can
be used to finance carbon reduction schemes between trading
partners and around the world.
Carbon credits differ from carbon allowances although the term
carbon credit is interchangeably used to represent both
price may be more likely to be perceived as fair
by those paying it.
complex, expensive, and time-consuming to
help to ensure that all investment goes into
genuine sustainable carbon reduction schemes.
Chances of cheating
if correctly implemented a target level of
emission reductions may be achieved with more
the actual emissions might vary over time
provide a framework for rewarding
allows for more centralized handling of acquired gains
worth of carbon is stabilized by government
relative disadvantage to new or growing companies.
The Kyoto Protocol……
Reduction of Green House Gases
emission by developed countries in the
The First Commitment Period
International Emissions Trading
Market based approach used to attach a price to emitting GHG’s.
Also called the Cap-and-Trade method.
Cap - Central Authority sets the cap or limit on the total amount of
emission that can be done based on the commitment in Kyoto Protocol.
Trade - Firms can only release GHG’s equivalent to the amount of carbon
credits in their possession. Exceeding the limit leads to carbon tax/penalties
The mechanism known as “joint implementation,” defined in
Article 6 of the Kyoto Protocol, allows a country with an emission
reduction or limitation commitment under the Kyoto Protocol
(Annex I Party) to earn emission reduction units (ERUs) from an
emission-reduction or emission removal project in another Annex
I Party, each equivalent to one tonne of CO2, which can be
counted towards meeting its Kyoto target.
Under Joint Implementation, countries with commitments under
the Kyoto Protocol are eligible to transfer and/or acquire
emission reduction units (ERUs) and use them to meet part of
their emission reduction target.
Sets a project
Sell carbon credits
According to the UNFCCC,
“The clean development mechanism defined in Article 12 of
the Protocol allows a country with emission limitation
commitment to implement an emission-reduction project
in developing countries.”
There is no transfer of carbon credits from one entity to
another. There is only creation of new carbon credits.
Clean Development Mechanism
Economics of CDM
Sustainable development in host country
Contribution to technology transfer
Contribution to financial flow
Improve cost effectiveness of GHG mitigation in developed
Help reduce carbon leakage of emissions
Concept of VER’s
What should be the price
The price of the carbon credits is set by the
principles of demand and supply.
The government slowly reduces the number of
carbon credits in the market, increasing their prices
and making it more feasible to reduce GHG’s than
to buy carbon credits.
At present, price of 1 carbon
credit is 10 Euro to 15 Euro
Market for Carbon Trading……
Currently there are 5 Environmental
Exchanges, trading in Carbon Credits
India and the Kyoto Protocol
India is a Non Annex I country.
As of Sept 2012, it hosts 29.5% of CDM
According to the Planning Commission Report, the total CO2 emission
in 1990 was 10,01,352 Gg-Giga gm
Various projects are estimated to produce about
306 million CERs.
India’s contribution to carbon credits stands at $1 billion,
out of a global trading of about $5 billion. India has
generated about 30 million carbon credits and has a line-up
of about 140 million to introduce into the global market.
These comprise chemical units, plantation companies,
municipal corporations and waste disposal units that can
easily sell their carbon credits for good amounts of money.
India along with China, lead countries
in earning Carbon Credit
India pocketed Rs
the year 2005
just by selling carbon
credits to developedcountry clients.
India has generated 30 million
Carbon credits & 140 million
are in pipeline
Some of the Leading companies of
India using & selling Carbon
GUJARAT FLOUROCARBONS Ltd.
Adani Power managed to reduce GHG
emissions by 1.8 million CERS in the
Mundra Project in Gujarat.
So it sold the excess carbon credits, getting
about 600 crores from the transaction.
The major beneficiary of
What after 2012… End of
2009 UNFCCC – Copenhagen
No firm promises made, agreement to
halve carbon emissions by 2050.
Acknowledged Copenhagen Accord to
keep temperature rise below 2°C.
2011 UNFCCC – Durban
Agreement to make a legally binding
deal by 2015 coming into effect by 2020.
Development of Green Climate Fund to
distribute $100 billion to poorer countries to
fight climate change.