The document discusses carbon credits, the Kyoto Protocol, and India's position in the carbon credit market. Carbon credits are certificates that represent the right to emit a specific amount of carbon dioxide, which can be traded between businesses and countries. India, benefiting from the Clean Development Mechanism, is positioned to be a significant player in the carbon trading market, with potential earnings and projects aimed at reducing emissions.

1. CARBON CREDITS
G ro up M m be rs :
e
•A ha l Bha g la l
nc
 the concept, development,
Indian scenario and the
•Vine e t Sa ns a re
future expectations.
•Sha s hika nt Bo m m a
•Sa jid G a d ne
•I ra n Kha n
m
•Jo fy Ba by
• So nia Sha rm a
• G urp re e t Sing h
• N y Pa nc ha l
ila
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2. Agenda
2
1. Few Facts
2. Introduction to Carbon Credits
3. Introduction to Kyoto Protocol
4. Kyoto Protocol Mechanism
5. CDM
6. Challenges
7. Position of INDIA
8. Carbon Trading
9. Conclusion

3. Did You Know?
3
Ea c h o f the s e a c tiv itie s a d d 1 Kg CO 2 to y o ur c a rb o n
fo o tp rint.
• Tra ve lling by p ub lic tra ns p o rta tio n a d is ta nc e 1 0 to
1 2 Km ( 6 . 5 to 7 m ile s ).
• O p e ra ting y o ur c o m p ute r fo r 3 2 ho urs (6 0 wa tt
c o ns um p tio n a s s um e d )
• Pro d uc tio n o f 5 p la s tic ba g s .
• Fly ing with a p la ne a d is ta nc e o f 2 . 2 Km o r 1 . 3 7 5
m ile s .
• Pro d uc tio n o f 1 /3 o f a n A e ric a n c he e s e b urg e r.
m

4. What are CARBON CREDITS?
CREDITS
 The Co llins Eng lis h Dic tio na ry d e fine s a c a rbo n c re d it a s :
“Ac e rtific a te s ho wing tha t a g o ve rnm e nt o r c o m p a ny ha s
p a id to ha ve a c e rta in a m o unt o f c a rbo n d io x id e re m o ve d
fro m the e nviro nm e nt" .
 The p la n wo rks by c a p p ing the a m o unt o f to ta l e m is s io ns
tha t c a n be re le a s e d by a c o m p a ny o r bus ine s s .
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5. What are CARBON CREDITS?
CREDITS
 If there is a shortfall in the amount of gases that are used,
there is a monetary value assigned to this shortfall and it
may be traded. These credits are often traded between
businesses.
 However, they also are bought and sold in international
markets at whatever the determined market value for them
is.
 There are also times when these credits are used to fund
carbon reduction plans between trading partners.
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6. CARBON CREDIT MARKETS
 There are two types of markets in carbon credit:
1. Compliance Market (Annexure I countries)
2. Voluntary Market (Non- Annexure countries)
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7. The KYOTO PROTOCOL
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8. What is KYOTO PROTOCOL ?
 It was adopted in Kyoto, Japan, on 11th
December 1997
Objective:
 “Sta bilis a tio n of g re e nho us e gas
c o nc e ntra tio ns in the a tm o s p he re a t a le ve l
tha t wo uld p re ve nt a ir p o llutio n inte rfe re nc e
with the c lim a te s y s te m . ”
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9. What is KYOTO PROTOCOL?
 The Kyoto Protocol is a legally binding agreement that
arose out of the UNFCCC to tackle climate change through
a reduction of green house gas emissions.
 Countries (those listed in Annex I) are legally bound to
reduce man-made green house gases emissions by
approximately 5.2%
 Individual countries have their own reduction targets
outlined in Annex B of the Kyoto Protocol
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10. INDIA & KYO TO PROTOCOL
 India signed and ratified the Protocol in August, 2002.
 Since India is exempted from the framework of the treaty,
it is expected to gain from the protocol in terms of transfer
of technology and related foreign investments
 India maintains that the major responsibility of curbing
emission rests with the developed countries, which have
accumulated emissions over a long period of time.
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11. KYOTO MECHANISM
 Kyoto is a 'cap and trade' system that imposes national
caps on the emissions of Annex I countries. On average,
this cap requires countries to reduce their emissions
5.2% below their 1990 baseline over the 2008 to 2012
period.
 The types of Kyoto mechanisms are :
1. Clean Development Mechanism
2. Emissions trading
3. Joint implementation (JI)
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12. KYOTO MECHANISM
 Both Annex I & non-Annex I Parties must co-operate in
the areas of:
 Development, application & diffusion of climate
friendly technologies
 Research & systematic observation of the climate
system
 Education, training, & public awareness of climate
change &
 The improvement of methodologies & data for GHG
inventories.
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13. 13
CLEAN DEVELOPMENT
MECHANISM

14. CLEAN DEVELOPMENT
MECHANISM
CDM is a mechanism whereby an Annex I party may
purchase emission reductions which arise from
projects located in non-Annex I countries. The
carbon credits that are generated by a CDM project
are termed Certified Emission Reductions (CERs),
expressed in tonnes of CO2 equivalent
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15. CDM MARKET
 The CDM market is like any other commodity
market.
 Majority of the trading is done in the Primary market.
The secondary market is not as expanded as the
primary mainly because of the high volatility of the
carbon prices.
 The Buyers of CERs can be broadly classified into:
1. Compliance Buyers
2. Carbon Funds (e.g.: Carbon Fund of World Bank)
Traders
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3.

16. CDM PROCESS
IDENTIFICATION OF PROJECT AND DEVELOPMENT SUBMISSION OF THE PDD AND HOST COUNTRY
OF PROJECT CONCEPT NOTE APPROVAL VALIDATOR
DEVELOPMENT OF PROJECT DESIGN DOCUMENT MAKE PDD COMPLETELY AVAILABLE FOR 30 DAYS
VALIDATION OF PROJECT
HOST COUNTRY APPROVAL
SUBMISSION OF VALIDATION REPORT AND PDD
VERIFICATION AND CERTIFICATION
REGISTRATION WITH THE CDM
POSSIBLE REVIEW BY CDM EXECUTIVE BOARD
PROJECT IMPLEMENTATION AND MONITORING
16 ISSUANCE OF CERS TO PROJECT DEVELOPERS

17. CHALLENGES
 Procedural delays in the CDM:
 2,022 out of 3,188 projects are at validation stage
 An average wait of 80 days to go from registration
request to actual registration
 Complex rules and the capacity constraint:
 DOEs are unable to keep up with a large backlog of
projects awaiting registration
 It is difficult to recruit, train and retain qualified, technical
staff to apply the complex rules consistently
 Impact of delays on carbon payments:
 Delays for any reason in a project’s schedule can
jeopardize elements of its financing package, and
ultimately its construction and implementation
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18. 18
EMISSION TRADING

19. EMISSION TRADING
 Emissions trading (ET) is a mechanism that enables
countries with legally binding emissions targets to
buy and sell emissions allowances among
themselves.
 Under an emissions trading system, the quantity of
emissions is fixed (often called a "cap") and the
right to emit becomes a tradable commodity. The
cap (say 10,000 tonnes of carbon) is divided into
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transferable units (10,000 permits of 1 tonne of
carbon each)

20. EMISSION TRADING V/S CARBON TAXES:
THE POLITICS-WHO LIKES WHICH POLICY &
WHY?
 United States is the strongest proponent of emissions trading as
US is energy inefficient and has high per capita carbon dioxide
emissions levels.
 The European Union has been in favor of carbon taxes as the EU
is already relatively energy efficient
 The Russian Federation & the Ukraine are major supporters of
emissions trading
 Developing countries are extremely cautious of emissions
trading, & view it primarily as a "loophole" that the US & Japan
can use to avoid their domestic responsibility
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21. 21
JOINT IMPLEMENTATION (JI)

22. JOINT IMPLEMENTATION (JI)
 Joint implementation is a project-based mechanism
by which one 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 or removals achieved through
that project. The unit associated with JI is called an
emission reduction unit (ERU)
 In simple terms Joint Implementation means transfer
of emissions reduction at the project level.
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23. JOINT IMPLEMENTATION (JI)
 There are two approaches for verification of emission
reductions:
 Under JI Track 1, a host Party that meets all of the
eligibility requirements may verify its own JI projects
and issue ERUs for the resulting emission reductions
or removals.
 Under JI Track 2, each JI project is subject to
verification procedures established under the
supervision of the Joint Implementation Supervisory
Committee.
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24. 24
CARBON TRADING

25. CARBON TRADING
 A carbon trading system allows the development of a
market through which carbon dioxide or carbon
equivalents can be traded between participants, whether
countries or companies. Each carbon credit is equal to
100 metric tons of carbon dioxide, which can be traded
or exchanged in market.
 There are two kinds of carbon trading – Emission trading
and trading in Project-based Credits. The two categories
are put together as Hybrid trading System
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26. TYPES OF CARBON TRADING
1. EMISSION TRADING:
 A company can reduce its emission by half the cost of allowance
bought from other company
 On the other hand, a company with higher expenditure for
reduction of its emissions buys the required allowance from other
company to save its emission cost
2. PROJECT-BASED TRADING:
 Government & World Bank subsidized credit for project-based
trading to the companies calculating how much carbon dioxide
equivalent they save/reduces
 Project-based Credit trading includes ‘baseline-and-credit’ trading
and ‘offset’ trading
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27. TYPES OF CARBON TRADING
3. HYBRID TRADING SYSTEM:
 In Hybrid trading system, both emission trading and
offset trading are used and try to make allowance
exchangeable for project-based credits.
 Hybrid trading system is enormously complex as it is not
only difficult to try to create credible ‘credit’ and make
them equivalent to ‘allowance’
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28. 28
CARBON NETWORK

29. CARBON NETWORK
Seller
Buyers
Exchange
Annex 1
Banks
country
Trading
Individuals Banks
exchange
Banks
NGO & Individuals
Govt.
Consultants Brokers & Consultants
Traders
Intermediary
Annex 2 & 3 Others
service
countries
providers
Others Consultants NGO &
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Government

30. PARTIES INVOLVED IN CARBON
TRADING
PROJECT ENTITY:
 Joint venture company or a limited partnership that are set up
specifically to undertake the project
SPONSOR:
 Individuals, companies or other entities that support a project
who have a direct or indirect interest in the project.
LENDER:
 If the project is financed through debt, one or more banks may
be involved in providing this.
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31. PARTIES INVOLVED IN CARBON
TRADING
EQUITY PROVIDER:
 Equity may be provided by project sponsors or third party
investors who ensure that the project produces a ROI as set out in
the business plan or prospectus.
CONSTRUCTOR:
 Who have responsibility for the completion of the works, & often
have to assume liability for finishing construction on time and to
budget.
OPERATOR:
 Person responsible for the operation and maintenance of the
project facilities once completed
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32. PARTIES INVOLVED IN CARBON
TRADING
SUPPLIER
BUYER
INSURER:
 If a risk is to be mitigated by purchasing insurance, the lender
will need to be satisfied as to the track record and credit-
worthiness of the insurer.
RATING AGENCIES:
 The rating agencies may be involved if the financing of the
project involves the issue of securities
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33. PARTIES INVOLVED IN CARBON
TRADING
EXPERTS:
 Experts are individuals who give advise on key technical,
engineering, environmental and risk aspects of a project.
Experts need to be able to demonstrate a track record of
expertise in the relevant area
HOST GOVERNMENT:
 The objectives and role of the host government will vary but
may involve economic, social and environmental guidelines
and issuance of relevant consents, permits and licenses
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34. 34
ADVANTAGES OF CARBON
TRADING

35. ADVANTAGES OF CARBON
TRADING
 New cash source to companies who are able to maintain their
emission levels well within the permissible limits.
 The overall ecological balance is preserved
 The company or country gets rewarded for applying clean
technology in its production process.
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36. ADVANTAGES OF CARBON
TRADING
 A much better corporate and social image which wins public
approval
 Encourages activities like tree plantings which would help
reduce soil salinity, improve water quality and enhance
biodiversity
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37. KEY RISKS AND
UNCERTAINTIES
 The extent to which the Kyoto Protocol guidelines are
implemented & followed
 The attitude of US which is the biggest polluter and had
refused to sign the treaty
 The final rules and decisions relating to an emissions trading
market
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38. 38
POSITION OF INDIA

39. POSITION OF INDIA
 India is considered as the largest beneficiary, claiming about
31 % of the total world carbon trade through CDM
 It is expected to rake in at least Rs 22,500 crore to Rs 45,000
crore over a period of time and Indian companies are expected
to corner at least 10 per cent of the global market in the initial
year
 If India can capture a 10% share of the global CDM market,
annual CER revenues to the country could range from US$ 10
million to 300 million
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40. PRESENT STATUS OF DUMPING
GROUNDS IN INDIA
 In India, due to increased population & commercial
development, cities are facing problems of Municipal Solid
Waste disposal. The urban population in larger towns & cities
in India is increasing at a decadal growth rate of above 40%
 Various processes/technologies available to reduce the amount
of Municipal Solid Waste are as follows:
 Physical (a. Pelletisation)
 Biochemical (a. Aerobic Composting b. Anaerobic Digestion)
 Thermal (a. Incineration b. Gasification)
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41. CARBON TRADING AT MCX
 The Multi Commodity Exchange of India Ltd entered into an
alliance with the Chicago Climate Exchange in 2005 to
introduce carbon credit trading in India
 MCX is the futures exchange. People here are getting price
signals for the carbon for the delivery in next five years. The
exchange is only for Indians and Indian companies
 The Indian government has not fixed any norms nor has it
made it compulsory to reduce carbon emissions to a certain
level. So, people who are coming to buy are actually financial
investors
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42. CARBON TRADING AT MCX
 TRADING BENEFITS:
 Sellers and intermediaries can hedge against price risk
 Advance selling could help project to generate liquidity and
thereby reducing its cost of implementation
 There is no counter party risk as exchange guarantee the trade
 The price discovery on the exchange platform ensure the fair
price for both the sellers and buyers
 Bring players to a single platform
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43. OUTLOOK FOR INDIA
 India is one of the exempted from this protocol as they are
stated as developing countries, but overseas companies can
buy carbon credits from these countries.
 Now companies in India can use Carbon credits to get liberal
loans, incentives by multinationals in their countries and
benefits like better social and ecological visibility
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44. INDIAN COMPANIES: TAKING
ADVANTAGE
 Gujarat Fluoro Chemicals is amongst first companies worldwide to get
its carbon emission reduction project certified. It is set to reap rewards
from the sale of CER credits from this year itself
 Tata Steel is believed to have signed a MoU with the Japanese
government agency “NEDO” for sale of credits accruing to it from
carbon reduction following the implementation of an over Rs 250 crore
modernization and upgradation project
 NTPC and several state electricity boards have also applied for carbon
credit benefits. Most of them are replacing coal-based technologies with
more environment-friendly processes
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45. INDIAN COMPANIES: TAKING
ADVANTAGE
 Of the 15 projects approved by the UNFCCC so far, four are
Indian. These four are:
 Gujarat Flurochemicals,
 Kalpataru Power Transmission Ltd,
 The Clarion power project in Rajasthan and
 The Dehar power project in Himachal Pradesh
 The country accounted for 283 CDM projects out of the 819
registered by the CDM Executive Board, the environment
ministry, the World Bank and the International Emissions
Trading Association
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46. CONCLUSIONS
 There is a great opportunity awaiting for India in carbon
trading which is estimated to go up to $100 billion by 2010.
 In the new regime, the country could emerge as one of the
largest beneficiaries accounting for 25 % of the total world
carbon trade, says a recent World Bank report
 Analysts claim if more companies absorb clean technologies,
total CERs with India could touch 500 million.
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47. CONCLUSIONS
 Of the 391 projects sanctioned, the UNFCCC has registered
114 from India, the highest for any country.
 There are projects range from cement, steel, biomass power,
bio-gases co-generation and municipal solid waste to energy,
municipal water pumping and natural gas power. The ministry
has given the host-country clearance, the CDM projects will
have to be approved by the executive board of the UNFCCC
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48. THANK YOU
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