INTRODUCTION Greenhouse Gases: Carbon dioxide (CO2)The main source of CO2 emissions is theburning of fossil fuels: heating power generation transportationDeforestationCO2 has the largest impact on the greenhouse effect.There are Six Green House Gases: (Carbon Dioxide, Methane, Nitrous Oxide, Hydro-Fluoro-Carbons, Per-Fluoro-Carbons and Sulphur-Hexa-Floride) .The gases increase the atmospheres ability to trap infraredenergy and thus affect the climate
What is Carbon credit ?Carbon credits are a key component of nationaland international emissions trading that have beenimplemented schemes to mitigate global warmingThe concept of carbon credits came into existenceas a result of increasing awareness of the need forcontrolling emissions.They provide a way to reduce greenhouse effectemissions on an industrial scale by capping totalannual emissions and letting the market assign amonetary value to any shortfall through trading .
The greenhouse mitigation project generatecredits and these credits can be exchangedbetween businesses or bought and sold ininternational markets at the prevailing marketprice .The protocol followed with respect to carbontrading was KYOTO PROTOCOL.
Kyoto protocolProtocol to the international Framework Conventionon Climate Change with the objective of reducingGreenhouse gases that cause climate change.It was agreed on 11 December 1997 at the 3rdConference of the Parties to the treaty when theymet in Kyoto in Japan.Came into force on February 16, 2005
OBJECTIVEKyoto is intended to cut global emissions ofgreenhouse gases.The objective is to achieve "stabilization ofgreenhouse gas concentrations in the atmosphere ata level that would prevent dangerous anthropogenicinterference with the climate system."
Emission Allowances:The Protocol agreed caps or quotas on themaximum amount of Greenhouse gases fordeveloped and developing countries, listed in itsAnnex I .Operators- local business and other organizations.Each operator has an allowance of credits, whereeach unit gives the owner the right to emit one metrictonne of carbon dioxide or other equivalentgreenhouse gas
Unused allowances are sold as carbon credits.while businesses that are about to exceed theirquotas can buy the extra allowances ascredits, privately or on the open marketNational registries‘ managed – to validate andmonitor for compliance by the UNFCCC.
Kyotos Flexible mechanismsA credit can be an emissions allowance which wasoriginally allocated or auctioned by the nationaladministrators of a cap-and-trade programmitigating activities can occur in any developingcountry which has ratified the Kyoto Protocol, andhas a national agreement in place to validate itscarbon project through one of the UNFCCCsapproved mechanisms.
Once approved, these units are termed CertifiedEmission Reductions, or CERs. The Protocol allowsthese projects to be constructed and credited inadvance of the Kyoto trading period.The Kyoto Protocol provides for three mechanisms - Joint Implementation - Clean Development Mechanism - Emissions Trading
Emissions MarketThese allowances either can be sold privately or inthe international market at the prevailing marketprice.UNFCCC – It validates each international transfer.Carbon prices are normally quoted in Euros pertonne of carbon dioxide .The Chicago Climate Exchange, EuropeanClimate Exchange, Nord Pool, and PowerNext.Currently are four exchanges.
How buying Carbon credit can reduce emissions?It creates a market-by giving a monetaryvalue to the cost of polluting air.Emissions become an internal cost of doingbusinessExample
Setting a market price for carbon Unchecked energy use and emission levelsare predicted to keep rising Rule of supply and demand will push up themarket price• Encourage more groups to undertakeenvironmentally friendly activites
India’s RoleIndia signed and ratified the Protocol inAugust, 2002.India has generated 30 million carboncredits, the second highest transactionvolumes in the world.
CriticismThe Kyoto trading period only applies for fiveyears between 2008 and 2012.As several countries responsible for a largeproportion of global emissions (notablyUSA, Australia, China and India) have avoidedmandatory caps. Concerns raised over the validation of CDMcredits.