Prepared by:

 Muhammad Sameer (2017-CH-14)

 Sobia Ijaz (2017-CH-26)
 Bilal Shahzad (2017-CH-34)
 Farqaleet Malik (2017-CH-38)
 Muhammad Irfan Malik (2017-CH-52)

Group 1 8/13/20 Energy Engineering

 Table of contents
Page #
1.1. Introduction ___________________________________________________________2
1.2. What is Kyoto Protocol __________________________________________________5
1.3. The Compliance Market. ________________________________________________ 7
1.4. Projects reducing emissions. _____________________________________________ 8
1.5. Concluding comments__________________________________________________ 10
1.6. References ____________________________________________________________10

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 Title: CARBON CREDIT
Abstract

Carbon credit is a tradable certificate to emit certain amount of CO2 in environment. Also, we
have stated about the greenhouse effect and how it gets disturbed by global warming. Only
Asia emits 53% of global CO2. In this report we have briefly described about carbon credit and
Compliance Market. This report also provides comprehensive information about Kyoto
Protocol, its major objectives and mechanism. With the help of block-wise graph we have
summarized the Top CO2 emitting countries namely India, China and USA. Major countries
purchasing carbon credits are Canada, USA, New Zealand, and Australia. The report highlights
different development projects for example, Afforestation and reforestation and waste water
treatment to reduce the emission of greenhouse gases on large scale. The report concludes with
an argument that we should devised ways and different enhanced technologies to reduce CO 2
emission.
Key words: Greenhouse effect, Compliance Market, Afforestation and reforestation

1.1 Introduction

“A carbon credit is a tradable permit or certificate that provides the industries or holder of the
credit the right to emit one ton of carbon dioxide or an equivalent of it.”
Each carbon credit is equivalent to one ton of CO2

For example: If a country has 800 carbon credits for one year it means that it has the permit to
emit 800 ton of CO2 in atmosphere for a year. If that country emits more than 800 ton of CO2
in a year there will be an international restriction on the country to emit more than allow able
limit. If the country wants to emit more than allow able limit it should have to purchase carbon
credits from another country which emits less amount of greenhouse gases than its allowable
limit in atmosphere. That’s why carbon credits are also trade able.

 Greenhouse Effect and How it disturbs.

The greenhouse effect is the process in which heat is trapped in the surface of the Earth by
greenhouse gases. These greenhouse gases can be thought of as a blanket wrapped around the
Earth, which keeps it warm. Greenhouse gases include carbon dioxide, methane and nitrous
oxides. Part of what makes Earth so livable is the naturally-arising greenhouse effect, which
keeps the planet at a friendly 15 °C (59 °F) on average. But in the last century or so, humans
have been interfering with the energy balance of the Earth, mainly through the burning of fossil
fuels that give off additional carbon dioxide into the air. The level of carbon dioxide in Earth’s
atmosphere has been rising consistently for decades and traps extra heat near the surface of the
Earth, causing temperatures to rise. A changing climate has a range of potential ecological,
physical and health impacts, including extreme weather events (such as floods, droughts,
storms, and heatwaves); sea-level rise; altered crop growth; and disrupted water systems.

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 Figure 1.1 Stepwise explanation of greenhouse effect

 Global Temperature increment

According to an ongoing temperature analysis conducted by scientists at NASA’s Goddard
Institute for Space Studies (GISS), the average global temperature on Earth has increased by a
little more than 1° C since 1880. Two-thirds of the warming has occurred since 1975, at a rate
of roughly 0.15-0.20°C per decade.

Fig 1.2: Graph of Temperature increment vs Years

The line plot above shows yearly temperature anomalies from 1880 to 2019 as recorded by
NASA, NOAA, the Berkeley Earth research group, the Met Office Hadley Centre (United
Kingdom), and the Cowtan and Way analysis. Though there are minor variations from year to

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year, all five records come in agreement with each other. All the lines show rapid warming in
the past few decades, and all show the last decade as the warmest.

 Top most CO2 Emitting countries

The Block wise graph show below represents CO2 emission country wise. This graph is used
to compare entities (such as countries or regions) in relation to other. Here each inner rectangle
represents a country –and each region is representing with different color. The size of each
rectangle corresponds to its annual CO2 emissions in 2017. Combined, all rectangles represent
the global total.

Fig 1.3: Graph of contribution of CO2 emission in different regions of world

According to the graph shown above Asia alone contributes 53% of global CO2 emission. In
Asia China contributes 27% and India contributes 6.8%. Total contribution by India and China
is 33.8%. China is, by a significant margin, Asia’s and the world’s largest emitter: it emits
nearly 10 billion tonnes each year, more than one-quarter of global emissions. Pakistan emits
199 ton (0.55%) of CO2 globally. North America is the second largest regional emitter at 18%
of global emissions. In North America USA alone contributes 15%, which is quite domination
in this region. Europe also contributes 17% of global emission. Africa and South America are

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both fairly small emitters: accounting for 3-4% of global emissions each. Both have emissions
almost equal in size.

1.2. What Is the Kyoto Protocol?

In response to the impact that industrialised nations are having on the global environment, the
Kyoto Protocol of 1997, since signed by 187 countries. The Protocol was linked to the United
Nations Framework Convention on Climate Change (UNFCCC). It was adopted in Kyoto,
Japan on December 11, 1997, and became international law on February 16, 2005. The purpose
of the Kyoto Protocol is to limit the global emission of greenhouse gases. By setting such
targets, emission reductions took on economic value. To help countries meet their emission
targets, and to encourage the private sector and developing countries to contribute to emission
reduction efforts, negotiators of the Protocol included three market-based mechanisms –
emissions trading, the clean development mechanism and joint implementation.

 Major objectives of Kyoto Protocol

The Protocol sets binding targets for developed countries, known as “Annex I Parties”, to limit
or reduce greenhouse gas emissions. It has established innovative mechanisms to assist these
Parties in meeting their emissions commitments. Each Annex I Party has a binding
commitment to limit or reduce GHG emissions and innovative mechanisms have been
established for Parties to facilitate compliance with this commitment. Other commitments
include.

• Each Annex I Party must undertake domestic policies and measures to reduce GHG emissions
and to enhance removals by sinks.

• In implementing these policies and measures, each Annex I Party must strive to minimize any
adverse impact of these policies and measures on other Parties, particularly developing country
Parties.

• Annex I Parties must provide additional financial resources to advance the implementation of
commitments by developing countries.
• Both Annex I and non-Annex I Parties must cooperate in the areas of.
(a) The development, application and diffusion of climate friendly technologies.
(b) Research on and systematic observation of the climate system.
(c) Education, training, and public awareness of climate change.
(d) The improvement of methodologies and data for GHG inventories.

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 EMISSION TARGETS AND INITIAL ASSIGNED AMOUNT
The major commitment under the Kyoto Protocol, requires each Annex I Party to ensure that
its total emissions from GHG sources listed in Annex A to the Kyoto Protocol over the
commitment period do not exceed its allowable level of emissions (Annex A covers GHG
emissions from the energy, industrial processes, solvent and other product use, agriculture and
waste sectors. The allowable level of emissions is called the Party’s assigned amount. Each
Annex I Party has a specific emissions target inscribed in Annex B to the Kyoto Protocol,
which is set relative to its emissions of GHG in its base year. The Annex B emissions target
and the Party’s emissions of GHG in the base year determine the Party’s initial assigned amount
1 for the Kyoto Protocol’s five-year first commitment period (2008 – 2012). The quantity of
the initial assigned amount is representing in individual units, called assigned amount units
(AAUs), each of which represents an allowance to emit one metric tonne of carbon dioxide
equivalent.

 THE KYOTO MECHANISMS

The Kyoto Protocol allows Annex I Parties to add to or subtract from their initial assigned
amount, thus raising or lowering the level of their allowed emissions over the commitment
period, by trading Kyoto units with other Parties. These additions and subtractions are carried
out in accordance with the so-called Kyoto mechanisms:
 Emissions trading.
 Joint implementation (JI)
 Clean development mechanism (CDM).

 The Doha Amendment phase 2 of Kyoto Protocol

In December 2012, after the first commitment period of the Protocol ended, parties to the Kyoto
Protocol met in Doha, Qatar, to adopt an amendment to the original Kyoto agreement. This so-

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called Doha Amendment added new emission-reduction targets for the second commitment
period, 2012–2020, for participating countries. The Doha Amendment had a short life. In 2015,
at the sustainable development summit held in Paris, all UNFCCC participants signed yet
another pact, the Paris Climate Agreement, which effectively replaced the Kyoto Protocol.

 The Paris Climate Agreement

The Paris Climate Agreement is a landmark environmental pact that was adopted by nearly
every nation in 2015 to address climate change and its negative effects. The agreement includes
commitments from all major GHG-emitting countries to cut their climate-altering pollution and
to strengthen those commitments over time.

1.3. The Compliance Market

The opportunity to trade carbon credits was created by the United Nations’ Kyoto Protocol, a
legally binding document committing countries to achieving reductions in the emission of
greenhouse gases (GHG). The treaty created a number of such targets that nations needed to
meet in order to safeguard the environment. Collectively, industrial nations agreed to reduce
their GHG by an average of 5.2% from 1990 levels, the major impact of this to be borne by the
most developed countries.

The government of each Kyoto signatory country is now responsible for ensuring that it and
companies operating there are reducing GHG emissions. To facilitate this, the Kyoto
Protocol established a medium, known as a carbon credit. Each carbon credit permits
emissions of one tonne of CO2. If a company has emissions over its allowance, then this
entails a cost. Conversely, companies able to stay under their allowance receive credits which
can be traded on exchanges. Additionally, companies creating projects, say in developing
countries, which actively reduce GHG emissions become eligible for these carbon credits and
then can raise funds, by selling them, perhaps to a company exceeding its allowance, on an
exchange. Credits generated for the compliance market must come from a high standard project
which is regularly checked and verified by independent review boards appointed for each
country. Each such project goes through rigorous testing and analysis to determine the resultant
reduction of carbon emission or the amount of carbon it is in fact to remove from the
atmosphere. Once validated and registered, the credits generated by a project are known as
Certified Emissions Reductions (CERs).

 How are credit prices established?

Credits are quoted in Euros (e) or US Dollars (US$) for sale on the global market. Factors
affecting credit prices include:
 Market price
 Credit
 Terms and conditions of sale
 Stage of project development
 Access to market
 Risk

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 Countries purchasing Carbon credits
A map shown in fig 1.4.1 represents the Countries purchasing carbon credits. These Countries
includes Canada, USA, New Zealand, Australia, Finland, Sweden, Norway, Poland, Germany,
France.

fig 1.4.1 A map represents the Countries purchasing carbon credits.

1.4. Projects reducing emissions

These are sample categories of environmental projects which reduce carbon emissions and may
generate carbon credits.

 Renewable energy sources

Sources of renewable energy, such as a wind farm or hydro-electricity plant, generate
significant reductions in GHG emissions and can gain high levels of carbon credits. This type
of projects has the added benefit of providing power as well as reducing emissions.

 Capture of fugitive emission and waste handling and disposal

Developing and installing technology which captures emissions and waste and then either
disposes of it in an environmentally friendly way or reuses it, results in a reduction in GHG.
This is the second biggest project type, as factories produce large amounts of waste are able to
reuse it. For example, rice factories produce huge amounts of waste rice husks that can easily
be burned for fuel and are carbon-free.

 Manufacturing and chemical industries

These projects involve changing manufacturing processes to make them more environmentally
friendly. Changes to industrial processes can make significant reductions in carbon emissions.

 Agriculture

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A number of developing countries have large agricultural sectors but not the financial resources
to make them environmentally sustainable. Projects which reduce animal waste such as
methane, one of the most dangerous GHG, and change agricultural process techniques to
methods which are more environmentally friendly, can achieve significant reductions in carbon
emission.

Fig 1.5.1 Pie graph of % of Clean development mechanism (CDM) projects in different countries

 Mining and Metal production

These projects involve changing production processes to achieve significant reductions in
carbon emissions and make them more environmentally-friendly.
 Transport
This refers to the process of switching transportation to less carbon intensive means or
introducing new technologies to improve vehicle fuel efficiency.
 Afforestation and reforestation
Afforestation refers to the process of establishing a forest on land that has never been a
forest, or has not been one for a considerable period of time. Reforestation refers to
restocking existing forests and woodlands which have been depleted. This is especially
important in regions such as South America where logging and other environmental
destruction are widespread. Projects such as these have the added benefit of safeguarding
the habitat of hundreds of species of animals which rely on forest and rainforest for survival.
 Wastewater Treatment
Wastewater treatment facilities have significant impact on reducing the environmental
effects of various industrial processes. Industries which use innovation and technology to
reduce this environmental impact are suitable for significant credits based on CO2
reduction.
 Methane Capture

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 Many process and industries produce environmentally harmful methane, from landfill sites
to mines and farms. Methane capture systems are a cost-effective way of tackling climate
change and they use proven technologies to address global warming. Methane fired power
plants are already in use, turning the waste into energy. Projects such as these produce
carbon credits.

Fig 1.5.1 Pie graph of % of different types of Clean development mechanism (CDM) projects

1.5. Concluding Comments

As we know that Climate change is the defining challenge of our age because of global
warming and Kyoto protocol is somehow proved to be closing-cap on it. Carbon trading is
extremely new and many companies, suppliers and buyers are still coming to terms with its
possibilities. As long as the environment remains a priority, companies, countries and
governments will all continue to be on the lookout for ways to reduce their carbon output and
buyers of carbon credits will have the potential to benefit. Also, that we should devised ways
and different enhanced technologies and improved the existing technologies to reduce CO2
emission on global level.

1.6. References
 https://unfccc.int/sites/default/files/08_unfccc_kp_ref_manual.pdf
 investopedia.com/terms/k/kyoto.asp
 carbon%20cedit/MH-Carbon-Invest.pdf
 https://ourworldindata.org/co2-and-other-greenhouse-gas-emissions
 http://www.environment.gov.au/climate-change/climate-science-data/climate-
science/greenhouse-effect

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