Carbon credit


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Carbon credit

  1. 1. INTRODUCTION Greenhouse Gases: Carbon dioxide (CO2)The main source of CO2 emissions is theburning of fossil fuels: heating power generation transportationDeforestationCO2 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
  2. 2. What is Carbon credit ?Carbon credits are a key component of nationaland international emissions trading that have beenimplemented schemes to mitigate global warmingThe 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 .
  3. 3. 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.
  4. 4. Kyoto protocolProtocol 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
  5. 5. OBJECTIVEKyoto 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."
  6. 6. 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
  7. 7. 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 marketNational registries‘ managed – to validate andmonitor for compliance by the UNFCCC.
  8. 8. Kyotos Flexible mechanismsA credit can be an emissions allowance which wasoriginally allocated or auctioned by the nationaladministrators of a cap-and-trade programmitigating 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.
  9. 9. 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
  10. 10. Emissions MarketThese 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.
  11. 11. 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 doingbusinessExample
  12. 12. 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
  13. 13. India’s RoleIndia signed and ratified the Protocol inAugust, 2002.India has generated 30 million carboncredits, the second highest transactionvolumes in the world.
  14. 14. CriticismThe 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.