This document discusses the key concepts of green economics compared to conventional economics. It outlines some basic axioms of green economics, including that resources are finite and growth cannot continue indefinitely. It describes how green economics aims to internalize external costs through policies like resource taxes, polluter pays principles, and emissions trading systems. Kyoto Protocol and the EU Emissions Trading System are provided as examples of large emissions trading schemes. India and China's involvement in carbon credit markets through clean development mechanism projects is also summarized.

1. PROF. M.K.GHADOLIYA
DIRECTOR (ACADEMIC)
V.M.OPEN UNIVERSITY, KOTA
GREEN ECONOMICS

2. Structure of the economy Conventional
Economics
Necessities: water,
food, energy, housing, Index of sustainable
waste management economic welfare
Land tax
Distribution, trade, tool manufacture
Administration and Public services
Financial services Central point
Money Gross Domestic Product

3. IntrodictionIntrodiction
 Green economics
 Includes the eco-logical and environmental impact in addition to the economical impact of
a
transaction
 Includes externalities ignored by conventional economics
 Basic Axioms:
 It is impossible to expand forever into a finite space.
 It is impossible to take forever from a finite resource.
 Everything on the surface of the Earth is interconnected.
 Conventional growth is delusional Money
consumer firm
Consumption Product Production
External cost or Benefit External cost or Benefit
3rd
Party
Involuntary costs
free Benefits

4. Green Economics
Resources
 Resource
action/work
Wealth
 Finite Resources and
Renewable Resources.

5. Green Economics
Internalizing costs
 Resource tax: Cost of using finite resources, and cost
towards development of renewable sources of energy
 The polluter pays principle: a tax built into the cost of a
product or processes having impact on environment and human
health
 Producer responsibility: Cost of research to find out the
effect of a process or a product have and cost of neutralizing these
effects
 Positive inducements: Tax breaks etc.
 Tradable credits: A form of rationing. Use your credits or
put it in the market to trade

6. Green Economics
Work
 Enlisted amongst top in the list of activities that
bring happiness
 Good work can be stimulated in absence of
money
 Use credit instead of money

7. Green Economics
 In effect
 Cap-and-trade system – Green house gas (GHG) emission
 reduction (baseline and credit)
 If exceed the cap
 Pay ‘carbon tax’
 Purchase carbon credits through emission trading schemes
 Invest in carbon project –
 Gets funding because of the resulting reduction in the GHGs.
 Resulting emissions reductions may become Certified Emissions
 Reductions (CERs), which can be traded in the future
 Offset its excess emission by emission reduction through carbon
 project

8. Green Economics
Emission trading: Major systems
 Kyoto Protocol – 1995 international treaty, effective 2005
 United States – Clean air act (1990), Regional greenhouse gas
initiative (NY state), Chicago climate exchange
 European Union – EU ETS
 Largest of such schemes created along with Kyoto protocol.
 Caps CO2 productions from large installations
 Covers half of the EU’s CO2 emissions
 Australia – Australian carbon trading scheme
 Green tags (REC) – Positive incentive for renewable energy
provider

9. Kyoto Protocol
 Kyoto Protocol
 Kyoto protocol
 Aimed at reduction of GHGs in view of international climate change
 Assigns mandatory emission limitations to the signatory nations.
 Developed (Annex I) countries: Required to reduce their GHG emission
 compared to that in 1990
 Developing (Annex II) countries: Not required to reduce their emissions
but
 participate in CDM
 Reduce collective GHG emissions by 5.2% compared to the year 1990
(which
 is 29% less compared to the expected emission levels in 2010 in absence of
 the protocol)

10. Kyoto Protocol
Clean Development Mechanism (CDM)
 Allows Annex I countries to invest in projects reducing
emissions in developing countries as an alternative to more
expensive emission reductions in their own countries.
 Joint implementation (JI)
 Allows collaboration with other Annex I countries

11. Green Economics
Carbon emission trading: Tit-bits
 In 2005, 374 million metric tonnes of carbon dioxide
equivalent (tCO2e) were exchanged through projects in
2005 240% increase relative to 2004
 Centre for carbon trading London financial market
 Emission trading an important market based solution to
address climate change problem
 Collective initiative by NGO’s, companies and government
– economical growth while preserving
environment

12. India and China
Indian companies have earned $500 million from carbon-credit
sales, in last two years (Ernst & Young). I
CERs : India - 43%, China -17% (of the total issued by CDM
executive board)
Projects : India – 259, China -101
Expected average annual income : India -15%, China - 44%

13. All is not green
Tricky implementation
May be cheaper to corrupt entities distribution licenses
than to purchase licenses legally
Issuance of surplus of credits
Difficult administration
Actual effect on the environment is dubious
Market instability
Taxes are predictable

14. Few notables
Walmart’s massive initiative
Reduce energy consumption of existing stores by 20% and
other’s by 30% in 7 years
Simple solutions to reduce energy for heating, refrigeration
and lighting
Sets an example for other enterprises
Brazil
Every gas station is required to carry ethanol (made from
agricultural products), 85% flexible-fuel cars

15. THANK YOU!