This document provides an overview of the Clean Development Mechanism (CDM) and carbon trading under the Kyoto Protocol. It discusses how the CDM allows countries with emission reduction obligations to meet targets by purchasing certified emission reduction credits from emission-reducing projects in developing countries. It outlines the project approval and certification process, how carbon credits are measured and traded, and gives examples of CDM projects and carbon traders in India. The document also discusses arguments for and against carbon trading, and considers the future prospects of carbon trading schemes.

1. Clean Development Mechanism
and Carbon Trading
-B.V.Raghunandan, SVS College, Bantwal
UGC Sponsored National Conference on,
”The Green Umbrella: Green Business Opportunities”
Canara First Grade College, MangalorePage 1

2. The Constitution of India
• It is the duty of the state to, “protect and improve the
environment and to safeguard the forests and wildlife of the
country”
• It is the duty of every citizen, “to protect and improve the natural
environment including forests, lakes, rivers and wildlife”
• It required Bhopal
Gas Tragedy to
make the
Government to
realise its duty to
pass
Environment
Protection Act in
1986
Page 2

3. Certain Bitter Facts
• Modern life is imported
• Modern gadgets are
imported
• Pollution is imported
• Environment Protection is
also imported in being
hypocritical
• The biggest polluter, the
USA is a non-participant
globally
• Anti-Septic Life damages
environment more
• Man’s efforts are nothing
before that of Nature
Page 3

4. Global Warming: Wrong Direction
• Concerns about global warming
• Concern was about the increase in temperature
Page 4

5. Corrected Agenda
• The UN Conference on Human Environment called The
Stockholm Conference,1972
• 26 Principles Emerged from the Conference addressed by Olaf
Palme and Indira Gandhi
• In 1973, EU created Environmental and Consumer Protection
Directorate
• The awareness became international
Page 5

6. The
UN
Action
• Governing Council of the United Nations Environment
Programme called for global action against Persistent
Organic Pollutants, defined as, "chemical substances
that persist in the environment, bio-accumulate
through the food-web, and pose a risk of causing
adverse effects to human health and the environment”
Page 6

7. Earth Summit
• Held in 1992 in Rio De Janeiro
• Set up UNFCCC (United Nations Framework Convention on
Climate Change)
• Prevention of climate change through reduction of green house
gases to 1990 levels by 2000 and a 5.2% reduction by 2008-12
Page 7
• Common but differentiated responsibilities

8. Images of Earth Summit
Page 8

9. Kyoto Protocol
•
•
•
•
Adopted in 11 December, 1997 in Kyoto, Japan
Brought into force from February 16, 2005
Totally 192 countries ratified the Protocol
The USA, the prime polluter of the world had no
intention of signing the Protocol
Page 9

10. Elements of Kyoto Protocol
• Divided the countries into Annex I
Countries and Annex II Countries
• Annex I include developed countries
that have obligations to reduce GHG
emissions to 1990 levels by 2000
and 5.1% below 1990 levels by
2008-12
• Annex II include developing
countries not having any such
obligations
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11. Elements …….contd.
• Gases identified were
carbon di oxide,
methane, nitrous
oxide, sulphur
hexafluoride,
hydrofluorocarbon and
perfluorocarbon
• Flexible Mechanisms:
Clean Development
Mechanism: carbon
credit and trading
Page 11

12. Clean Development Mechanism
• A CDM Executive Board was set up
• It will assess and approve projects in
Annex II countries
• These projects will be awarded Certified
Emission Reduction
• Annex I countries can meet their GHG
emission limitations by buying CERs
(measured in carbon credit)
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13. Carbon Credit and Trading
• One carbon credit is equal to one metric
tonne of carbon di oxide emission or one
metric tonne of burning up oil
• A trading mechanism is created for
determining the price on the basis of
supply and demand
• Industrial units in Annex I countries can
instal pollution control equipment or buy
the carbon credits from Annex II countries
Page 13

14. Obligations of Kyoto Protocol
• Green-Annex I countries-having obligation
• Red-Annex II countries-not having the obligation
• Yellow-In Transition countries-Joint Implementation 14
Page

15. Ratification of Kyoto Protocol
• Green-Countries that have ratified the protocol
• Red-Refused to ratify
Page 15

16. CDM Project Cycle
• Stages: Project Idea, Development,
Approvals, Validation, Registration and
Issue of CERs
• Finance: Debt, Equity, CER Forward
Buying or CER Spot Buying
• Price: Fixed Price, Floating Price and the
Combo
Page 16

17. Trading Mechanism
Page 17

18. Carbon Dioxide Emission
Page 18

19. Carbon di Oxide
Emission
•
•
•
•
•
The USA
China
Russia
Japan
India
25.2%
15.2%
6.7%
5.4%
4.4%
•
•
•
•
•
•
Germany
U.K
Canada
Italy
Mexico
France
3.7%
2.4%
2.3%
2%
1.7%
1.6%
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20. Eligibility to Participate
• The country should have ratified the protocol
• The project should have calculated the assigned amount
of carbon emission
• Establish a national system for estimating emissions and
removals of greenhouse gases within the country.
• They must have in place a national registry to record and
track and must annually report such information to the
secretariat.
• They must annually report information on emissions and
removals (carbon sinks) to the secretariat.
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21. Indian Scenario
Top Energy Guzzlers
Thermal Power
Iron & Steel
Cement
Fertilisers
Textiles
Aluminium
Pulp and Paper
Million mt
160.3
36.1
14.5
12
4.5
2.4
1.4
Page 21

22. Indian Environment Laws
• 1882:The Easement Act
allowed private use of ground
water and made all surface
water a state property
• 1927: Indian Forest Act
(Amended in 1984)-transit of
forest produce and the duties
leviable
• 1948: The Factories Act:
(Amendment in 1987)application to hazardous
processes
• 1970: The Merchant
Shipping Act: waste arising
from ships
• 1972: The Wildlife Protection
Act: (Amended in 1991)
• 1974: The Water(Prevention
and Control of Pollution Act)
• 1980: The Forest
(Conservation) Act
• 1981: The Air (Prevention
and Control) Act
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23. Indian Environment Laws…contd
• 1982: The Atomic Energy Act
..Radioactive waste
• 1986; The Environment
Protection Act
• 1988: The Motor Vehicles
Act: …hazardous waste
• 1991: The Coastal
Regulation
Zone…construction along
coastal line
• 1991: The Public Liability
Insurance Act …accidents
due to hazardous material
• 1999; The Environment
(siting for industrial projects)
Rules
• 2000: The Ozone Depleting
Substance (Regulation and
Control) Rules
• 2001: The Batteries
(Management and Handling)
Rules
• 2002: The Noise Pollution
Rules
• 2002: The Biological
Diversity Act
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24. Indian Authority
• Ministry for Environment and Forests is
the designated national authority
• Many companies have been registered as
carbon traders
• MCX has tied up with ECX for offering
Hedging and futures trading
• Both futures and OTC products are
introduced
Page 24

25. Carbon Traders in India
• Grasim Industries
Limited
• Tata Motors Limited
• Tata Steel Limited
• Tata Power Company
Limited
• Reliance Energy Limited
• Indo Gulf Fertilizers
Limited
• Valera Global Limited
• Andhyodhaya Green
Energy Limited
• Indus Technical and
Finance Limited
• Rajasthan Renewable
Energy Corporation
• Bajaj Financial Services
Limited
• Blue Star Engineering
Services Limited
Page 25

26. Arguments in Favour of carbon
Trading
• Polluting countries must be penalised
• Polluting countries should pay a price
• Projects in Annex I countries have an
option: Install pollution control equipment
or buy the carbon credit
• Enable the projects in developing
countries to partially finance the energy
saving plans
Page 26

27. Arguments Against……
• As Annex II countries have no obligations,
MNCs will go to these countries through
FDI
• Developed countries produce the goods
that are consumed in developing
countries-the user must be penalised than
the producer
• Obligations should be on all the countries
• Further temperature differential
Page 27

28. Future of Carbon Trading
• Looks Bleak
• The USA has convinced 13 industrialised
nations to set up a new protocol after 2012
• The countries can have the arrangement
internally
• The steam has gone out of the movement
Page 28

29. Alternative: Get out of Popular
Misconceptions
•
•
•
•
•
•
•
•
Misconceptions are:
Nuclear energy is safer than thermal
Wind energy protects environment
All smoke is the same
All the smoke is bad for the environment
Clean environment through Phenyl, Ddt, BHC
Clean water through chlorine
Sponsoring Zero Based Research
Page 29

30. Alteration of
Business Models
• Miniaturising hydel
projects
• Developing technology for
smaller units of production
for local consumption
• Avoiding criss-cross
movement of
transportation
• Actively encouraging
research in fuel cells
• Hybrid automobiles with
fuel cells being one of the
Page 30
fuel

31. Redefining Forest and Animal Welfare
• Man-Animal coexistence
• Encourage usage of
animals in transportation
• Killing of wild animals
alone should be banned
• Encourage rearing wild
animals
• Encourage private Tiger
Farms along with tiger
national parks
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32. THANK YOU
Page 32