carbon trading to save future

1. CREDIT SEMINAR
ON
CARBON TRADING TO SAVE FUTURE
SEMINAR INCHARGE
Dr. V. Nepalia
Professor & Head
Dept. of Agronomy
RCA, Udaipur
SPEAKER
Mohammed Mohsin
Ph.D. Scholar
Dept. of Agronomy
RCA, Udaipur

2. Outline
Introduction
Global practices to reduce the emission
carbon trading
Kyoto Protocol
Carbon market at a glance
Carbon sellers and buyers
Carbon trading Indian scenario
Benefits
Conclusion

3. Introduction
 Since the industrial revolution, there has been drastic increase in
the concentration of atmospheric carbon dioxide.
 Concentration of CO2 in the atmosphere has increased from 280
ppm in the pre-industrial era (~1750) to 397 ppm in 2014, (GCP,
2015).
 Effect of global warming : (i) increase in average global
temperature, (ii) rise in sea level, and (iii) erratic change in climate
like drought, floods etc.
 There are three strategies of lowering CO2 emissions to mitigate
climate change (Schrag, 2007) : (i) reducing the global energy use,
(ii) developing low or no-carbon fuel, and (iii) sequestering CO2
from point sources or atmosphere through natural and engineering
techniques.

5. Carbon sequestration
 Carbon sequestration can be defined as the process of
capturing carbon from the atmosphere and depositing in a
reservoir for long term.
 Transfer of atmospheric CO2 into other long lived global pools
including oceans, soils, vegetation and geological formations
by biotic and abiotic processes.
 Carbon sequestration is the capture and secure storage of CO2
that would otherwise be emitted or remain in the atmosphere
(Lal, 2008).

6. Recommended management practices and carbon
sequestration potential
Recommended practices C sequestration potential
(Mg C/ha/yr)
Conservation tillage 0.10-0.40
Winter cover crop 0.05-0.20
Soil fertility management 0.05-0.10
Elimination of summer fallow 0.05-0.20
Forages based rotation 0.05-0.20
Use of improved varieties 0.05-0.10
Organic amendments 0.20-0.30
(Lal et al., 1998)

7.  If a country cannot meet its green house gas reduction target, it can buy
credits from other countries that have credits in excess. As a result carbon
has become a commodity, which is traded in open market, called carbon
market.
 The financial instrument used for this trade is called carbon credit/carbon
offset which is equivalent to one tonne of CO2 equivalent.
 The carbon trading targets cover emissions of the six main greenhouse
gases:
Carbon dioxide (CO2); Methane (CH4); Nitrous oxide (N2O); Hydro
fluorocarbons (HFCs); Perfluoro carbons (PFCs) and Sulphur hexafluoride
(SF6)

8.  According to the protocol the developed countries will have to reduce
their GHG emission to the level that are 5.2 % lower than those of 1990
within 2008-12.
 The idea was to achieve the said target by the developed countries by
burning less fossils fuel, afforestration and using renewable source of
energy. But these alternative were not practically viable and
affordable.
 Thus there was need to develop some economically viable mechanism
that serves the dual purpose of smooth running of the operation of the
business houses and protection of our environment.
 The name of the solution was carbon trading.

9. The Reduction of carbon emissions
A better environmental situations and to Mitigate
Global Warming.
 Provide a financial incentive for companies to
pollute less.
Promotion of sustainable production processes and
also sustainable lifestyles across the Globe.

10. Carbon credit
 Credit that a landowner can receive in exchange for implementing
perennial vegetation on their land which result in high level of carbon
sequestration known as carbon credit.
 Carbon credits (often called a carbon offset) are certificates issued to
countries that have successfully reduced emissions of GHG which causes
global warming.
 Carbon credits (or) certified emission reductions are a certificate just like
a stock.
 Each carbon credit represents one tonne of co2 either removed from the
atmosphere or saved from being emitted.
-Sequestration (afforestration etc)
-Co2 saving projects (wind power, solar etc)

11. Carbon credit

12. How carbon credits are earn ?
Carbon credit encompasses two ideas-
1. The prevention or reduction of carbon emission
produced by human related activities
2. The removal of carbon from the atmosphere

13. How to generate carbon credits???
CARBON CREDITS
13

14. What should be the price of carbon????
At present, price of 1 carbon credit is
5 Euro to 10 Euro
14

15.  First international attempt to address the issue seriously
 made under the United Nations framework convention on climate change
(UNFCC) in 1997.
 approved by 192 countries and the European Union as a whole, individual
entity.
 an international agreement of UNFCC that sets binding targets for 37
industrialized countries and the European community for reducing GHG
emissions to an average of 5 % against 1990 levels over the period 2008- 2012
 was put into effect in 2005.

16. Kyoto protocol
Annex I (Developed )
• Australia
• Austria
• Monaco
• Canada
• Netherland
• New Zealand
• United Kingdom
• Germany
• Spain
• Switzerland
• Greece
Non annex I (Developing)
• India
• Brazil
• Bangladesh
• Pakistan
• China
• Afghanisthan
• Algeria
• Nepal
• Argentina
• Malaysia
• Bolivia
• Srilanka

17.  It was realized that developed countries were principally
responsible for the high levels of greenhouse gases emissions
therefore the protocol places a substantial burden on developed
nations by following the principle of “common but differentiated
responsibilities”.
 The major Kyoto mechanisms to manage greenhouse effect
are:
1. Emissions trading
2. Clean development mechanism (CDM)
3. Joint implementation (JI)

18. KYOTO Protocol
Project basedAllowance based
Joint
implementation
Clean
development
mechanism
Emission trading
AAU
(Assigned
amount
unit)
CER
(Certified
emission
reduction)
ERU
(Emission
reduction
unit)

19.  Under this mechanism, an Annex I Party may transfer Kyoto units to or acquire
units from another Annex I Party.
Developed
country A
(need cc)
Developed
country B
Earn carbon credit
called Assigned
amount unit
Payment for cc
Sells these carbon
credit

20. How does emission trading work ?

21.  Project-based mechanism by which Annex I Party can invest in a project
that reduces emissions or enhances sequestration in another Annex I
Party, and receive credit for the emission reductions.
 The unit associated with JI is called an emission reduction unit (ERU).
 High cost developed countries can establish ERU in the low cost developed
countries to earn CER to meet Protocol commitments.

22. Developed
country A
(need cc)
Developed
country B
Earn carbon credit
called Emission
reduction unit
Set a project
Sells carbon credit

23. Type number 2012 ERUs
(crores)
HFC, PFC and N2O Reductions 67 17.8
CH4 reduction, cement, coal &fugitive 306 73.4
Renewables 139 49.2
Energy efficiency 222 36.0
Fuel switch 24 4.1
Afforestation,reforstration&avoided
reforestatoin
3 0.3
Total 761 136.4
Source; UNEP, 2012

24. 9%
40%
18%
29%
3%
1%
HFc,Pfc,and N2O Reductions CH4 reduction,cement,coal&fugitive
Renewables Energy efficiency
Fuel switch Afforestation,reforstration&avoided reforestatoin
UNEP,2012

25.  CDM is the entry point for developing countries (non-Annex I) into the Kyoto Protocol
on Climate Change.
 Allows governments or private entities in rich countries to set up emission reduction
projects in developing countries.
 They get credit for these reductions as 'certified emission reductions’ (CER's)
 Meant to benefit both industrial and developing countries.
 Act as a vehicle through which investment flows and the transfer of climate-friendly
technologies can takes place.
 The dual goals of the CDM
 promotes sustainable development in developing countries,
 allows industrialized countries to earn emissions credits from their investments in
emission-reducing projects in developing countries.

26. Developed
country A
(need cc)
Developing
country B
Earn carbon credit
called certified
emission reduction
Set a project
Sells carbon credit

27. - Projects must assist Non-Annex I Parties (developing countries) “in
achieving sustainable development and contributing to the ultimate
objective of the Convention”.
- Projects must result in “real, measurable and long-term benefits
related to the mitigation of climate change”.
- Projects must result in “reductions in emissions that are additional
to any that would occur in the absence of the certified project
activity.

28. Clean development mechanism (CDM) statistics (as on May, 2015)
Total no. of projects registered with UNFCCC 7630
No. of Projects requesting registration(2014) 18
Total No. of CERs issued 1.55 billion
Total No. of Registered projects from India(% to total) 1565
(20%)
Total No. CERs issued to Indian Projects(% to total) 203.31 million
(13%)
http://www.idbi.com/pdf/Carbon-Magazines/IDBI-Carbon Development-2015

29. Maji 2014
0
10
20
30
40
50
60
70
80
90
100
1 2 3 4 5 6 7 8
BillionEuro
2005 2006 2007 2008 2010 2011 20122009

30. Market for Carbon Trading……
Currently there are 5 major Environmental
Exchanges, trading in Carbon Credits
POWER NEXT
EUROPEAN CLIMATE
EXCHANGE
30

31. Maji 2014

32. Maji 2014

33. • India is a Party to the United Nations Framework Convention on Climate Change
(UNFCCC)
• India signed and ratified the Protocol in August, 2002 and has emerged as a
world leader in reduction of greenhouse gases by adopting Clean Development
Mechanisms (CDMs).
• The Seventh Conference of Parties (COP-7) to the UNFCCC decided that Parties
participating in CDM should designate a National Authority for the CDM.
• Accordingly the Central Government constituted the National Clean Development
Mechanism (CDM) Authority
• As per the conventions of Kyoto protocol, India being a developing country has no
emission targets to be followed. However, it can enter into CDM projects.
• MCX has become first exchange in Asia to trade carbon credits.

34. Some of the Leading companies of India using &
selling Carbon Credits…
GUJARAT FLOUROCARBONS Ltd.
34

35. • Andhyodaya Green Energy
• Grasim Industries Ltd.
• Tata Steel Limited
• Reliance Energy Ltd.
• Rajasthan Renewable Energy Corporation
• Madhya Pradesh Rural Livelihood Project
• Dhariwal Industtries Ltd.
• Tata Motors Limited
• Indo Gulf Fertilizers
• Indus Technical & Financial Consultants Ltd.
• Tata Power Company Limited

36. Name of Sector No of Projects CER upto 2012( million)
Energy industries (Renewable/Non
renewabe sources)
918
19.11
Manufacturing Industries 47 0.89
Energy Demand 77 1.16
Waste handling and disposal 23 0.76
Metal Production 3 1.25
Transport 4 0.28
Afforestation and Reforestation 15 0.10
Fugitive emissions from fuel(Solid, Oil
and gas)
2 0.054
Chemical Industries 3 0.24
Energy Distribution 2 0.12
Total 1094 23.96
Source; http://www.cdmindia.gov.in/reports_new.php

37. Name of States No of Projects CER upto 2012 (million)
Andhra Pradesh 218 86.8
Chattisgarh 105 27.4
Gujarat 372 127.0
Himachal Pradesh 101 17.3
Karnataka 255 69.7
Maharashtra 388 61.6
Orissa 81 22.8
Multi State 97 25.3
Rajasthan 237 63.2
Tamil Nadu 371 52.0
Uttar Pradesh 173 37.8
Total 2939 723.0
Source; http://www.cdmindia.gov.in/reports_new.php

38. • India - high potential of carbon credits
• India can capture 10% of Global CDM market
• Annual revenue estimated range from US$10 million to 330
million.
• Wide spectrum of projects with different sizes
• Vast technical human resource
• Strong industrial base
• Dynamic, transparent & speedy processing

39. • Jindal Vijaynagar Steel
Ready to sell $225 million worth of saved carbon by using Corex furnace
technology which prevents 15 million tonnes of carbon.
• Powerguda in Andhra Pradesh
The company has made a claim of having saved 147 MT of CO2 by
extracting bio-diesel from 4500 Pongamia trees in their village.
• Handia Forest in Madhya Pradesh
Estimated that 95 very poor rural villages would jointly earn at least
US$300,000 every year from carbon payments by restoring 10,000
hectares of degraded community forests.
(Birla et al., 2012)

40. • Delhi Metro Rail Cooperation (DMRC) has become the first such railway
project in the world to get carbon credit from the United Nations for helping in
reduction of greenhouse emission.
• DMRC earned carbon credits worth about Rs 47 crore annually for the next
seven years.
• According to the UN, Delhi Metro has helped in reducing pollution levels in the
city by 6.3 lakh tonnes every year, thereby helping in mitigating impacts of
global warming.
• "Today, about 18 lakh people travel by Delhi Metro that is completely non-
polluting and environment-friendly.
• Every passenger who chooses to use Metro instead of car/bus contributes in
reduction in emissions to the extent of approximately 100gm of carbon
dioxide for every trip of 10km and, therefore, becomes party to the reduction
in global warming.
• According to figures by DMRC, more than 91 thousand vehicles have been
removed from Delhi's roads because of Delhi Metro.
(Banawat and Vardia 2015)

41. Gain from carbon trading through a hypothetical example
Current carbon emissions by country A 100000 tone.
Targeted reduction as per protocol 10% i.e. 10000 tone.
Cost per tone reduction in country A $ 5.
Cost per tone reduction in country B $ 3.50.
Total cost of protocol compliance for country A 10000 CERs x $ 5= $ 50000.
Assumed price of 1 CER in the climate exchange from
country B
$ 4.50.
Cost to A, if CER is purchased of the self from B 10000 CERs x $ 4.50= $ 45000
Saving in cost due to carbon trading to country A $ (50000-45000) = $ 5000
Profit to country b by selling 10000 CERs
10000CERs x $(4.50-3.50) =
$10000
(Maji 2014)
Let us suppose A is a developed country and B is Least developed country with
surplus CERs

42. Carbon calculation for powerguda village in andhra pradesh, 2003-2012
Year
Oil yield
(Kg)
Trees
Total oil
yield (kg)
Carbon
(t)
CO2
eq.(t)
Value
(US $)
Discount
value(3%)
NPV
(US $)
2003 - 3600 410 0.3198 1.1737 6.7158 1 6.7158
2004 - - 494 0.38532 1.41412 8.09172 0.97 7.84897
2005 - - 590 0.4602 1.68893 9.6642 0.94 9.08435
2006 0.5 - 1125 0.8775 3.22043 18.4275 0.91 16.769
2007 1.0 3600 2.808 10.3054 58.968 0.88 50.7125
2008 1.5 - 5400 4.212 15.458 88.452 0.85 51.8918
2009 2.0 - 7200 5.616 20.6107 117.936 0.82 96.7075
2010 2.5 - 9000 7.202 26.4313 151.242 0.79 119.481
2011 3.0 - 10800 8.424 30.9161 176.904 0.76 134.447
2012 3.5 - 12600 9.828 36.0688 206.388 0.73 150.663
51219 40.1328 147.287 842.789 644.321
(Wani et al., 2007)

43. Reduction in greenhouse gas emission.
Source of revenue for developing nations.
 Supports a free market system.
Impetus for alternative sources of energy or green
technology.

44. • Carbon Trading brings forth financial incentives to reduce carbon dioxide
emission and implement eco-friendly/green technologies.
• The alternative/renewable sources of energy like wind, solar and hydro are
supposed to get financial boost to substitute fossil fuels.
• Especially developing countries like india will earn foregin exchange from the
carbon trading.
• Carbon trading also beneficial for developed countries by saving the cost of
emission reduction . So developed as well as developing countries will be
benefited from carbon trading.