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Carbon Trading-
The Green
Business
PRESENTED BY: SUSHMAN
BISWAS
THE KYOTO
PROTOCOL
• An United Nation- led international
agreement reached in 1997 in Kyoto,
Japan under UNFCCC
• Put to force on February 2005.
• To address the problems of climate
change and the reduction of
greenhouse gas emissions.
OBJECTIVES OF THE KYOTO
PROTOCOL
• Commitment to move away from fossil fuel energy sources (oil, gas
and coal) to renewable sources of energy viz. hydro, wind, solar
power by 38 signatory countries
• Commitment to reduce greenhouse gas emissions by 2008-2012 to
5.2 percent below1990 levels.(legally binding protocol)
• Targets for greenhouse gas emissions reduction were established
for each industrialized country. (Annex 1 countries)
• Developing countries (non-Annex 1 countries) including China and
India were asked to set voluntary targets for greenhouse gas
emissions.
WHAT IS CARBON TRADING?
• CAP- Assignment of an upper threshold limit on the amount of
pollutant that can be emitted (measured in Assigned Amount Units
or AAUs) by a country.
• Emission permits or equivalent number of allowances or
credits are issued to emit a specific amount of carbon dioxide
(cap) to the country. 1 credit= 1 ton of carbon dioxide
• TRADE- the transfer or trade of allowances
• Excess or unused allowances/credits can be traded to the
countries whose emissions have exceeded their assigned cap.
• The purchased allowances can be used to increase the allowance
limit by the purchasing country.
Countries whose emissions are less than their assigned amount or
the CAP can sell or TRADE the excess amount to countries whose
emissions have exceeded their assigned amount.
CARBON
OFFSETTING
• Offset Credits for eco-friendly technologies are
purchased by developed nations to avoid or
substitute reduction in their own emission.
• Investments in green technologies and harness
alternative forms of energy in the developing nations.
CARBON TRADING
IMPLEMENTATION MECHANISMS:
• Emission Trading (ET)
 Countries whose emissions are less than their assigned amount can sell the excess
amount to countries whose emissions have exceeded their assigned amount
 The Assigned amounts can be defined as a tradable allowances, or commodity, and this
free market is known as the “CARBON MARKET."
• Clean Development Mechanism (CDM)
 Developed countries can fund emission reduction projects (e.g. Solar energy, wind energy
and other green technologies) in developing nations that did not sign Kyoto Protocol.
 In exchange, the developed countries earn legally recognized emission credits called CERs
(Certified Emission Reduction) to offset their emission obligations.
• Joint implementation (JI)
 Developed countries can implement emission reduction projects in another developed or
developing country and earn Emission Reduction Units (ERUs)
 ERUs can be used to meet the carbon allowance or can be sold in the market.
BENEFITS OF CARBON
TRADING:• Reduction in green house gas emission
 Stringency in the cap or the upper threshold limit is contributing to
lower emission over the years
• Source of revenue for developing nations
 Developing nations can earn revenue by selling carbon credits to
countries with more fossil fuel demand.
• Supports a free market system
 The carbon trade market is without any economic intervention and
regulation by government except to regulate against force or fraud
• Impetus for Alternative sources of energy or green technology
 Threshold limits encourages industries to harness alternative
sources of energy and invest in green technology globally or in
indigenous research.
DISADVANTAGES OF CARBON
TRADING:
• Right to pollute
 Industries in the ratified nations are purchasing legal rights to
pollute the atmosphere
• Slow process
 Industries are opting the easy way– purchase more allowances
than implementing greener technologies
• Lack of centralized system or global framework
 Absence of a centralized and accepted global standards/act are
missing
• No effective carbon reduction in the atmosphere
 Leads to carbon reduction in one place and results in carbon
emission in some other place
CONCLUSION
• Carbon Trading brings forth financial incentives to reduce carbon
dioxide emission and implement eco-friendly/green technologies.
• Stringent assignment of the caps or the upper threshold limits over
the years can ameliorate the green house gas emission problem.
• The alternative/renewable sources of energy like wind, solar and
hydro are supposed to get financial boost to substitute fossil fuels.
• Absence of a standard measuring technique in carbon sequestration
or storage questions the feasibility of Carbon Offsetting techniques.
• Presently, the market is primarily driven by financial interest or
gains by the investment farms as opposed to seeking environmental
remedy.

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Carbon Trading

  • 2. THE KYOTO PROTOCOL • An United Nation- led international agreement reached in 1997 in Kyoto, Japan under UNFCCC • Put to force on February 2005. • To address the problems of climate change and the reduction of greenhouse gas emissions.
  • 3. OBJECTIVES OF THE KYOTO PROTOCOL • Commitment to move away from fossil fuel energy sources (oil, gas and coal) to renewable sources of energy viz. hydro, wind, solar power by 38 signatory countries • Commitment to reduce greenhouse gas emissions by 2008-2012 to 5.2 percent below1990 levels.(legally binding protocol) • Targets for greenhouse gas emissions reduction were established for each industrialized country. (Annex 1 countries) • Developing countries (non-Annex 1 countries) including China and India were asked to set voluntary targets for greenhouse gas emissions.
  • 4. WHAT IS CARBON TRADING?
  • 5. • CAP- Assignment of an upper threshold limit on the amount of pollutant that can be emitted (measured in Assigned Amount Units or AAUs) by a country. • Emission permits or equivalent number of allowances or credits are issued to emit a specific amount of carbon dioxide (cap) to the country. 1 credit= 1 ton of carbon dioxide • TRADE- the transfer or trade of allowances • Excess or unused allowances/credits can be traded to the countries whose emissions have exceeded their assigned cap. • The purchased allowances can be used to increase the allowance limit by the purchasing country. Countries whose emissions are less than their assigned amount or the CAP can sell or TRADE the excess amount to countries whose emissions have exceeded their assigned amount.
  • 6. CARBON OFFSETTING • Offset Credits for eco-friendly technologies are purchased by developed nations to avoid or substitute reduction in their own emission. • Investments in green technologies and harness alternative forms of energy in the developing nations.
  • 7. CARBON TRADING IMPLEMENTATION MECHANISMS: • Emission Trading (ET)  Countries whose emissions are less than their assigned amount can sell the excess amount to countries whose emissions have exceeded their assigned amount  The Assigned amounts can be defined as a tradable allowances, or commodity, and this free market is known as the “CARBON MARKET." • Clean Development Mechanism (CDM)  Developed countries can fund emission reduction projects (e.g. Solar energy, wind energy and other green technologies) in developing nations that did not sign Kyoto Protocol.  In exchange, the developed countries earn legally recognized emission credits called CERs (Certified Emission Reduction) to offset their emission obligations. • Joint implementation (JI)  Developed countries can implement emission reduction projects in another developed or developing country and earn Emission Reduction Units (ERUs)  ERUs can be used to meet the carbon allowance or can be sold in the market.
  • 8. BENEFITS OF CARBON TRADING:• Reduction in green house gas emission  Stringency in the cap or the upper threshold limit is contributing to lower emission over the years • Source of revenue for developing nations  Developing nations can earn revenue by selling carbon credits to countries with more fossil fuel demand. • Supports a free market system  The carbon trade market is without any economic intervention and regulation by government except to regulate against force or fraud • Impetus for Alternative sources of energy or green technology  Threshold limits encourages industries to harness alternative sources of energy and invest in green technology globally or in indigenous research.
  • 9. DISADVANTAGES OF CARBON TRADING: • Right to pollute  Industries in the ratified nations are purchasing legal rights to pollute the atmosphere • Slow process  Industries are opting the easy way– purchase more allowances than implementing greener technologies • Lack of centralized system or global framework  Absence of a centralized and accepted global standards/act are missing • No effective carbon reduction in the atmosphere  Leads to carbon reduction in one place and results in carbon emission in some other place
  • 10. CONCLUSION • Carbon Trading brings forth financial incentives to reduce carbon dioxide emission and implement eco-friendly/green technologies. • Stringent assignment of the caps or the upper threshold limits over the years can ameliorate the green house gas emission problem. • The alternative/renewable sources of energy like wind, solar and hydro are supposed to get financial boost to substitute fossil fuels. • Absence of a standard measuring technique in carbon sequestration or storage questions the feasibility of Carbon Offsetting techniques. • Presently, the market is primarily driven by financial interest or gains by the investment farms as opposed to seeking environmental remedy.