CARBON CREDITS & ITS TRADING

Prepared By:
Jatin Shah Pratik Jariwala

Contributors to CO2!

CARBON CREDIT

1 CARBON CREDIT

1 ton of CO2 or its equivalent greenhouse gas (GHG) which is an entitled certificate by UNFCCC.

United Nations Framework Convention on Climate Change

Act signed by 165 nations in 1992 at Rio de Janeiro.
Annex 1 & Non-Annex 1 countries. Annex 1 (developed countries) agreed to reduce their GHGs by 5.2% below 1990 levels in 1st commitment period 2008 2012.

KYOTO Protocol

Annex I Non-Annex I Not ratified

Annex I
Australia(Not ratified) Austria Belgium Monaco Canada Netherland New zealand United Kingdom Germany Spain Switzerland Greece

Non -Annex-1
India Bangladesh Brazil China Afghanistan Algeria Nepal Argentina Bolivia Srilanka Pakistan Malaysia Mauritius

from

Price Influencing Factors

Supply-demand mismtch Policy issues Crude oil prices Coal prices CO2 emissions European Union Allowances (EUAs) prices Foreign exchange fluctuations Global economic growth

An Example..
British Petroleum in UK emitting more than the accepted norms of UNFCCC. Tie up with a subsidiary in India or China under CDM. The credits arising out of the use of the new technology are sold to counterparts in Europe. Thus a carbon credit market is created.

INDIAN SCENARIO

INDIAN SCENARIO

Conditions In INDIA
No fixed norms of emission reduction by government.
Potential Participants Registry

Indias Potential
India Non Annex I country, has a large scope in emissions trading.
India and China together contribute to $5 billion of the global carbon trade estimated at $30billion. One of the leading generators of CERs through CDM.

Hedging The Price Risk An Example

Carbon Credit Traders In India

Andhyodaya Green Energy Grasim Industries Ltd. Indo Gulf Fertilizers Indus Technical & Financial Consultants Ltd Madhya Pradesh Rural Livelihoods Project Rajasthan Renewable Energy Corporation Reliance Energy Ltd. Tata Motors Limited Tata Steel Limited Bajaj Finserv Limited Dhariwal Industries Ltd Tata Power Company Limited BlueStar Energy Services Inc. Valera Global Inc.

A COMPANY ABC CO.

Suppose ABC Co. wants to buy carbon credits at the end of year 2008. The current price is Rs.1300 per ton and it expects the prices to up Rs.1400 per ton .To save itself from such Rs.1500 ton increase in price, the company decides to hedge on exchange platform.

THANK YOU

THANK YOU