Carbon Emissions Trading

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Carbon Emissions Trading

  1. 1. CARBON EMISSIONS TRADING A Presentation by –Noorudeen T
  2. 2. Why Carbon Trading? <ul><li>Carbon Trading is done as per the Kyoto Protocol to control GLOBAL WARMING. </li></ul><ul><li>The Kyoto Protocol ( a 1997 international treaty that took effect in 2005) is a voluntary treaty signed by 141 countries, including the European Union, Japan and Canada. </li></ul><ul><li>As per the KYOTO PROTOCOL it is mandatory for member countries reduce their greenhouse gas emissions by 5% --from 1990 levels-- in the next ten years, ie 2012 </li></ul>
  3. 3. What is Carbon Trading? <ul><li>Carbon emissions trading involves the trading of permits among countries and companies to emit carbon dioxide. </li></ul><ul><li>It is one of the ways countries can meet their obligations under the Kyoto Protocol to reduce carbon emissions and thereby mitigate global warming. </li></ul><ul><li>The idea was to make developed countries pay for their wild ways with emissions while at the same time monetarily rewarding countries with good behavior in this regard. </li></ul><ul><li>It should be noted that that the United States which accounts for one third of the greenhouse gases being emitted into the atmosphere is yet to sign the Kyoto protocol. </li></ul>
  4. 4. The Carbon Trading Methodology <ul><li>A country (or group of countries) caps its carbon emissions at a certain level and then issues permits to firms and industries that grant the firm the right to emit a stated amount of carbon dioxide over a time period . </li></ul><ul><li>Firms are then free to trade these credits in a free market. </li></ul><ul><li>Firms whose emissions exceed the amount of credits they possess will be heavily penalised </li></ul><ul><li>The idea behind carbon trading is that firms that can reduce their emissions at a low cost will do so and then sell their credits on to firms that are unable to easily reduce emissions. </li></ul>
  5. 5. India and Carbon Trading <ul><li>India is considered as the largest beneficiary, claiming about 31 per cent of the total world carbon trade. </li></ul><ul><li>It is expected to rake in at least $5 billion to $10 billion (Rs 22,500 crore to Rs 45,000 crore) over a period of time. </li></ul><ul><li>In developing countries like India, the emission levels are much below the target fixed by the Kyoto Protocol. So, they are excluded from reduction of GHG emission </li></ul><ul><li>On the contrary, they are entitled to sell surplus credits to developed countries. This is what makes trading in carbon credits such a great business opportunity. </li></ul>
  6. 6. From a CA’s Viewpoint: The Accounting and reporting angle. <ul><li>A new International Accounting Standard has been introduced and is being currently followed by European countries . The new standard treats Carbon Emission rights as B/S items. </li></ul><ul><li>The problem lies in measuring the amount of Carbon emitted, as there is no standard sampling and evaluation technique to arrive at a perfect evaluation. </li></ul><ul><li>It is important to note that countries like Australia, England etc., already have an accounting standard in place for Carbon trading. </li></ul><ul><li>India is yet to have an accounting standard in place for Carbon trading. A little fine tuning with AS 17(Segment Reporting) would help to bring out the exposure of Indian companies to Carbon Trading. </li></ul>
  7. 7. Critic’s “Carbon Call” <ul><li>There are critics of the schemes, mainly environmental justice NGOs and movements who see carbon trading as a proliferation of the free market into public spaces and environmental policy-making </li></ul><ul><li>They point to failures in accounting, dubious science and destructive impacts of projects upon local peoples and environments as reasons why trading pollution rights should be avoided </li></ul><ul><li>Instead they advocate making reductions at the source of pollution and energy policies that are justice-based and community-driven </li></ul>
  8. 8. Give both the warring sides a rest! <ul><li>“ If there is Global Warming only Carbon emission Trading is going to be possible. If Carbon emission trading happens only Critics can criticise”. </li></ul><ul><li>“ So what to do??” </li></ul><ul><li>AFFORESTATION - “PLANT MORE TREES” </li></ul><ul><li>SAVE FOSSIL FUELS – “ WALK or CYCLE” </li></ul>
  9. 9. “THANK YOU”

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