CARBON CREDIT INTRODUCTION GLOBAL WARMING A gradual increase

CARBON CREDIT

INTRODUCTION GLOBAL WARMING Ø A gradual increase in the overall temperature of the earth's atmosphere Ø Generally attributed to the greenhouse effect Ø Caused by increased levels of carbon dioxide, CFCs, and other pollutants AVOIDING IT Ø Carbon Credit Ø Carbon Bank Ø Carbon Trading

BACKGROUND The burning of fossil fuels is a major source of green house gas emissions. Cement & Steel Green house gases emittes: CO 2 CH 4 N 2 O HFCs Textile Fertilizer

CONCEPT Ø Result of increasing awareness of need for controlling emissions Ø Mechanism for carbon credit was formalized in the KYOTO PROTOCOL Ø It is an international agreement between more than 170 countries

MEANING A carbon credit is a generic term for any tradable certificate or permit representing the right to emit one ton of carbon dioxide or the mass of another greenhouse gas with a carbon dioxide equivalent to one ton of carbon dioxide. Carbon credits create a market for reducing greenhouse emissions by giving monetary value to the cost of polluting air. Carbon credits and carbon markets are component of national and international attempts to mitigate the growth in concentration of greenhouse gases.

DEFINITION Ø The Collins English dictionary defines a carbon credit as “a certificate showing that a government or company has paid to have a certain amount of carbon dioxide removed from environment Ø Investopedia incorporated investment defines a carbon credit as “permit that allows the holder to emit one ton of carbon dioxide”…which "can be traded in the international market at their current market price”

WORKING OF CARBON CREDIT SYSTEM Under Kyoto Protocol, developed countries have committed to bring down levels of GHGs like Carbon dioxide to those of 2000 by 2012. EMISSIONS CAN BE BROUGHT IN TWO WAYS: Ø By making existing technology energy efficient Ø Changing to a new clean technology However both are costly

A novel market based plan called the Clean Development Mechanism(CDM) was devised. Under this plan an industry in the developed world which has the target to reduce emissions from its production process would fund the conversion of an industry in the developing world to cleaner technology. For each ton carbon dioxide emission saved by the company in the developing world, it earns a certificate from the UN called “Certified Emissions Reduction”(CER)

HOW BUYING CARBON CREDIT CAN REDUCE EMISSIONS? Ø Creates a market for reducing greenhouse emissions Ø Gives a monetary value to the cost of polluting the air Ø An alternative to reduce emissions by buying carbon credits on the open market from organizations that have been approved as being able to sell legitimate carbon credits HOW DOES IT WORK? If an environmental resource is damaged or depleted in one area, a resource of equal or greater value should be generated elsewhere.

PRESENT POSITION OF CARBON CREDIT TRADE Ø At present, Carbon Credits are trading at an all time low as Carbon price in the EU(European Union) (main buyer of credits) has hit rock bottom Ø European unions has set low targets for the next phase of emission reduction between 2012 and 2020 that they are industry can achieve these targets on their own Ø Naturally they wont need to buy too many credits and the prices are going to remain low. The EU has decided that its industry can buy credits only from least developed countries(LDC)

POSITION OF CARBON CREDIT IN INDIA Ø India is in favor of introducing green technology in its industrial development Ø Projects in India treats carbon credit as a measure for pollution control. Ø India considers global warming as a serious threat to humanity. Ø By switching to CDM India has a lot to gain from Carbon Credits.

BENEFITS Ø India will contribute to theme of green house gas by adopting alternative sources of energy Ø Indian companies can make profits by selling the CER to the developed countries Ø India will get world wide recognition as a country which participates meaningfully in finding solutions to reduce global warming. Ø India has two commodity exchanges trading in carbon credits this means Indian companies can get a trading platform. Ø Multi Commodity Exchange (MCX) Ø National Commodity and Derivatives Exchange (NCDEX) Ø India will gain in terms of advance technological improvements and foreign investments

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