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carbon credit outlay

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  1. 1. C SQUARE RL JUNE 2009
  2. 2. CLIMATE CHANGE STUDIES UNDERSCORED TWO POINTS FIRSTLY SECONDLY EARTH’S CARBON ABSORBING CAPACITY IS FINITE AND DEPLETABLE PER CAPITA GHG EMISSION AND IS STRONGLY CORRELATED TO ECONOMIC PROSPERITY GROWTH OF GHG EMISSIONS POSE A THREAT TO HUMANKIND Without increase in GHG emissions or access to appropriate alternative technology options,countries would not be able to pursue socio-economic goals. Kyoto Protocol a global cooperative attempt to address both these issues   RL JUNE 2009
  3. 3. LIST OF COUNTRIES ANNEX I OF UNFCCC AUSTRALIA [NOT RATIFIED] LIECHTENSTEIN AUSTRIA LITHUANIA BELGIUM LUXEMBOURG BULGARIA MONACO CANADA NETHERLANDS CROATIA NEW ZEALAND CRECH REPUBLIC NORWAY DENMARK POLAND ESTONIA PORTUGAL EUROPEAN COMMUNITY ROMANIA FINLAND RUSSIAN FEDERATION FRANCE SLOVAKIA GERMANY SLOVENIA GREECE SPAIN HUNGARY SWEDEN ICELAND SWITZERLAND IRELAND UKRAINE ITALY UNITED KINGDOM JAPAN UNITED STATES OF AMERICA [NOT RATIFIED] LATVIA RL JUNE 2009
  4. 4. N O N -A N N E X I O F U N F C C C AFGHANISTAN ALBANIA KAZAKHSTAN KENYA THAILAND TIMOR-LESTE ALGERIA ANGOLA KIRIBATI KUWAIT TOGO TONGA ANTIGUA AND BARBUDA ARGENTINA KYRGYSTAN LAO PEOPLE’S DEMOCRATIC REPUBLIC TRINIDAD AND TOBAGO TUNISIA ARMENIA AZERBAIJAN BAHAMAS BAHRAIN LEBANON LESOTHO TURKMENISTAN TUVALU BANGLADESH BARBADOS LIBERIA LIBYAN ARAB JAMAHIRIYA UGANDA UNITED ARAB EMIRATES BELIZE BENIN MADAGASCAR MALAWI UNITED REPUBLIC OF TANZANIA URUGUAY BHUTAN BOLIVIA BOSNIA AND HERZEGOVINA BOTSWANA MALAYSIA MALDIVES UZBEKISTAN VANUATU BRAZIL BURKINA FASO MALI MALTA VENEZUELA VIET NAM BURUNDI CAMBODIA MARSHALL ISLANDS MAURITIUS YEMEN ZAMBIA CAMEROON CAPE VERDE MEXICO MICRONESIA ZIMBABWE CENTRAL AFRICAN REPUBLIC CHAD MONGOLIA MONTENEGRO CHILE CHINA COLOMBIA COMOROS MOROCCO MOZAMBIQUE CONGO COOK ISLANDS MYANMAR NAMIBIA COSTA RICA CUBA NAURU NEPAL CYPRUS COTE D’LVOIRE NICARAGUA NIGER DEMOCRATIC PEOPLE’S REPUBLIC DEMOCRATIC REPLUBLIC OF THE NIGERIA NIUE OF KOREA CONGO OMAN PAKISTAN DIJIBOUTI DOMINICA PALAU PANAMA DOMINICAN REPLUBLIC ECUADOR PAPUSA NEW GUINEA PARAGUAY EGYPT EI SALVADOR PERU PHILIPPINES EQUATORIAL GUNIEA ERITREA QUATAR REPUBLIC OF KOREA ETHIOPIA FIJI REPLUBLIC OF MOLDOVA RWANDA THE FORMER YUGOSLAV REPLUBLIC GABON OF MACEDONIA SAINT KITTS AND NEVIS SAINT LUCIA SAINT VINCENT AND THE GRENADINES SAMOA GAMBIA GEORGIA SAN MARINO SAO TOME AND PRINCIPLE SAUDI ARABIA SENEGAL GHANA GRENADA SERBIA SEYCHELLES GUATEMALA GUINEA SIERRA LEONE SINGAPORE GUINEA-BISSAU GUYANA SOLOMON ISLANDS SOUTH AFRICA HAITI HONDURAS SRI LANKA SUDAN INDIA INDONESIA SURINAME SWAZILAND IRAN ISRAEL SYRIAN ARAB REPUBLIC TAJIKISTAN JAMAICA JORDAN RL JUNE 2009 TRINIDAD AND TOBAGO TUNISIA TURKMENISTAN TUVALU UGANDA UNITED ARAB EMIRATES
  5. 5. FLOW CHART CLEAN DEVELOPMENT MECHANISM PROJECTS { CDM } PROJECT IDEA NOTE [PIN] PROJECT DEVELOPMENT DOCUMENT [PDD] DESIGNATED NATIONAL AUTHORITY [DNA] DESIGNATED OPERATIONAL ENTITY [DOE] PROJECT PARTICIPANT [PP] EMISSION REDUCTION PURCHASE AGREEMENT [ERPA] EXECUTIVE BOARD [EB] CERTIFIED EMISSION REDUCTIONS [CER] RL JUNE 2009
  6. 6. LIST OF INDICATIVE PROJECTS IN INDIA GENERAL   1. Renewable Energy Projects (Wind Power, Solar, Biomass, Hydel) 2.Fuel Switching (from fossil fuel to green fuel like biomass, rice husk, etc.) 3.Cogeneration in industries having both steam and power requirement 4.Energy Efficiency Measures (Boiler & Steam Efficiency, Efficient Cooling System, Back Pressure Turbines, Installation of Variable Speed Drives, Pump& Pumping System, Improved Co-gen Efficiency) 5.Induction of new technologies in power sector 6.Waste Management (Capturing landfill methane emission to capture power, Methane recovery from municipal solid wastes, biomethanation for power generation, Utilisation of waste and waste water emissions for generation of energy) 7. Transport (Fuel switch from gasoline/diesel to natural gas, Modal shift from air to train, road to train at macro level, Replacement of shipment of certain raw material through roads to pipeline) RL JUNE 2009
  7. 7. SPECIFIC  PROJECTS  1] Energy & Power                                       (Generation, Transmission & Distribution) 1. Renewable Energy like wind power project, biomass based project, solar power projects, small run of the river hydro electricity generation projects. 2. Refurbishment of existing power plants to achieve a heat rate which is amongst the top 20% of the heat rate of all power plants in the relevant regional grid 3. Fuel shift from cal to gas or liquid fuel to gas 4. Super critical or ultra super critical technologies for power generation 5. T&D loss reduction below CEA stipulated values through (HT line bifurcation, High Voltage Distribution System, etc.) 6. Power Generation through Methane recovery from municipal solid waste/ biomethanation 7. Replacement of SF6 containing equipment and destruction of SF6 etc. RL JUNE 2009
  8. 8. 2] Cement                                                      1. General energy efficiency improvement initiatives 2. Waste heat recovery from kiln fuel gas 3. Raw mix modification to reduce process Co2 emissions 4. Use of pozzolanas (fly ash/blast furnace slag) over and above the industry specifications 5. Fuel shift from coal to gas or to biomass or high calorific value wastes 6.Initiatives to reduce kiln volume through higher conversion in precalciners, etc. 3] Steel                                                           1. Coke dry quenching 2. Blast Furnace top gas heat and pressure recovery 3. Basic Oxygen Furnace gas waste heat recovery 4. Coal dust, oxygen and tar injection in Blast Furnace to reduce the coke rate 5. General energy efficiency improvement in rolling mill area 6. Oxy Fuel use in reheating furnaces 7. Corex Units 8. Waste heat recovery from DRI/Midrex process for sponge iron manufacture 9. Romelt iron making technology 10. Hydrogen annealing etc. RL JUNE 2009
  9. 9. 4] Pulp & Paper                                            1. Energy efficiency improvements 2. Biomass based cogeneration 3. Continuous pulping, etc. 5] Fertilizer                                                   1. Reduction of N2O in nitric acid/other fertilizer manufacture 2. Waste heat recovery 3. General energy efficiency improvement 4. Methane recovery and reuse 6] Coal Mining                                               1. Coal bed methane capture and use for power generation 2. Coal mine methane capture and use for power generation 7] Transport 1. Fuel shift from liquid fuel to CNG/LPG 2. Hybrid cars, electric cars and hydrogen fuel cells 3. O&M improvement of existing vehicles, etc. RL JUNE 2009
  10. 10. 8] Aluminium 1. PFC reduction through reduction in anode effect duration and frequency 2. Energy efficiency improvement in alumina refining, smelting and rolling 3. Heat recovery from bauxite digestion & bauxite digestion efficiency improvement 4. Dry scrubbing of smelter fumes, waste heat recovery, etc. 9] Chlor Alkali                                               1. Use of hydrogen to replace fossil fue 10] Agriculture                                                1. Land use change from rice cultivation to alternative crops/cropping pattern change 2. Forestry and Afforestation 3. Biodiesel/Ethanol 11] Sugar                                                         1. Bagasse cogeneration plants 2. Energy efficiency improvement 3. Ethanol (from molasses) as replacement for fossil fuels 12] Oil & Natural Gas 1. ◦ Methane/CNG leak reduction in T&D system ◦ Capture and use of natural gas which would otherwise have been flared RL JUNE 2009
  11. 11. • Carbon credits are “Entitlement Certificates” issued by United Nations Framework Convention on Climate Change (UNFCCC) to implementers of approved Clean Development Mechanism (CDM) projects. • Potential buyers of carbon credits are corporates in Annexure I countries that need to meet compliance prevailing in their countries as per the Kyoto Protocol or those investors who would like buy the credits and with the expectation of selling them at ahigher price during the KP phase (2008-12). • The extension of KP shall be ratified by the current signatories of KP in their future meetings essentially to curb GHG emissions into the environment. • Theoritically one carbon credit equivalent to one tonne of carbon dioxide or its equivalent greenhouse gas (GHG). • Emissions trading (ET) is a mechanism that enables countries with legally binding emissions targets to buy and sell emissions allowances among themselves. • Futures contracts in carbon credits are actively traded in the European as well as Indian exchanges [NCDEX AND MCX]. • In fact, many companies actively participate in the futures market to manage the price risks associated with trading in carbon credits and other related risks such as project risk, policy risk, etc. • The major price influencing factors would be a] supply-demand mismatch, b]policy issues, 3]crudeoil prices,4] coal prices, 5]carbon dioxide emissions, 6] weather/ fuel prices, 7]european union allowances {EUAs} prices, 8] foreign exchange fluctuations , 9] global economic growth. • India one of the leading generators of CERs through CDM, has a large scope in emissions trading. Around 300 total CDM projects comprising almost 1/3rd of the total CDM projects has been registered with the UNFCCC.Estimates of trading in carbon credits would touch US$ 100 billion by 2010. The total issued CERs with India as a host country till now stand at 34,101,315 (around 34 million), 1/3rd of total CERs issued by the UNFCCC.
  12. 12. CER FUTURE CONTRACT ON NCDEX CER Futures Product Note Exhibit 1 – CONTRACT SPECIFICATIONS OF CARBON CREDIT (CER) FUTURES (as on February 02, 2009) Futures Contract Specifications Type of Contract Futures Contract Specifications for Certified Emission Reduction Units (CERs) Name of Commodity Certified Emission Reduction (CER) – Carbon Credits Ticker symbol CERNCDEX Trading System NCDEX Trading System Basis Mumbai (NCDEX) - Exclusive of all Taxes, Levies and Duties Unit of trading One lot of 500 CERs (Carbon Credits) Delivery unit One lot of 500 CERs (carbon Credits) Quotation/base value Rs. per CER Tick size Rs. 0.20 CER Futures Quality specification Certified Emission Reduction (CERs) is a unit pursuant to Article Product Note 12 and requirements there under, as well as the relevant Launch Calendar: provisions in the CDM modalities and procedures and is equal to one metric tonne of carbon dioxide equivalent, calculated using global warming potentials defined by decision 2/CP.3 or as Contract Launch Month Contract Expiry Month subsequently revised in accordance with Article 5 of the Kyoto March 2009 Protocol or its successor agreements or decisions under United July 10, 2008 June 2009 Nations Framework Convention on Climate Change. September 2009 Quantity variation Up to +/- 250 CERs Delivery center At notified delivery centre at MUMBAI Hours of Trading As per directions of the Forward Markets Commission from time to time. Currently, Mondays through Fridays: 10:00 a.m. to 11:30 p.m. 10:00 a.m. to 11:55 p.m. (during US day light saving period) Saturdays: 10:00 a.m. to 2:00 p.m. The Exchange may vary the above timing with due notice The contents of this product note are subject to Rules, Byelaws and Regulations of NCDEX as in force from time to time and be read therewith. -14-
  13. 13. CER CONTRACT ON MCX Contract Specifications of Carbon Credit – Certified Emission Reduction (CER) EXCHANGE Symbol CER Description CERMMMYY Contracts available for trading November 08 contract Immediately on receipt of the approval letter by the Commission to 25th November 2008 February 09 contract Immediately on receipt of the approval letter by the Commission to 25th Feb 2009 May 09 contract Immediately on receipt of the approval letter by the Commission to 25th May 2009 August 09 contract Immediately on receipt of the approval letter by the Commission to 25th August 2009 November 09 contract Immediately on receipt of the approval letter by the Commission to 25th November 2009 Trading Trading period Mondays through Saturdays Trading session Monday to Friday: 10.00 a.m. to 11.30 p.m. Saturday: 10.00 a.m. to 2.00 p.m. Trading unit 250 tons of CER units Quotation/Base Value Rs. per ton Maximum order size 10,000 tons Tick size (min price 50 paise per ton movement) Daily price limits The base price limit will be 4%. Whenever the base daily price limit is breached, the relaxation will be allowed upto the 6% without any cooling off period in the trade. In case the daily price limit of 6% is also breached, then after a cooling off period of 15 minutes, the daily price limit will be relaxed upto 9%) In case of price movement in international markets which is more than the maximum daily price limit (currently 9%), the same may be further relaxed in steps of 3% with the approval of FMC. Initial margin 6% Special margin In case of additional volatility, a special margin at such percentage, as deemed fit, will be imposed immediately on both buy and sale side in respect of all outstanding position, which will remain in force for next 2 days, after which the special margin will be relaxed. Maximum allowable open For individual clients: 5,000,000 tons position For a member collectively for all clients: 25,000,000 tons or 15% of the market wide open position whichever is higher Delivery Delivery unit 250 tons of CER units Delivery Center Mumbai

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