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• Carbon trading, or carbon offsetting, is a way to balance or compensate for carbon emissions in one geographical place, with a reduction in emissions in another. Since it doesn‟t matter where Greenhouse Gases (GHG) are emitted, as their effect on climate change is global, reducing emissions in any other country is as effective as doing so locally. „Carbon emissions‟ refers to carbon dioxide (CO²), and are a form of GHG, as is methane and nitrous oxide, but for most of us it is easier to think in terms of carbon emissions. • Carbon offsetting reduces emissions with a minimum of effort and cost. Offsetting means paying someone else to reduce CO² in the atmosphere on our behalf. In that way we pay for the damage we are causing and the money stimulates the development of green technologies.
• This was an idea presented in response to the Kyoto Protocol that involves the trading of greenhouse gas (GHG) emission rights between nations. • For example, if Country A exceeds its capacity of GHG and Country B has a surplus of capacity, a monetary agreement could be made that would see Country A pay Country B for the right to use its surplus capacity. The Kyoto Protocol presents nations with the challenge of reducing greenhouse gases and storing more carbon. A nation that finds it hard to meet its target of reducing GHG could pay another nation to reduce emissions by an appropriate quantity.
When you buy a credit. reforestation and sequestration. it is then „retired‟ so it can‟t be sold again – the credit will be recorded against your name. Certified carbon credits are created by government approved abatement projects. • There are many different kinds of carbon credits.What is a Carbon Credit? • Carbon reduction projects throughout the world create a tradable „carbon credit‟ for every tonne of carbon dioxide equivalent (CO²-e) that is stopped from entering our atmosphere. . meaning that you have stopped one tonne of CO²-e that otherwise would have entered the atmosphere. These include projects such as harnessing landfill gas. and electricity consumption reduction.
• Advantages • Example . ▫ Carbon trading allows entities that cannot directly reduce their own carbon emissions to contribute to other‟s efforts. making an indirect but measurable impact on carbon dioxide reduction. • Application ▫ An entity that receives money in exchange for its carbon credits will then use the money to launch or support a project intended to reduce carbon emissions.• Carbon Offset • Credits ▫ Carbon trading aims to prevent increases in environmental carbon dioxide by offsetting carbon-emitting activities with carbon-conserving activities. ▫ In one hypothetical example of carbon trading. an energy company might buy carbon credits that will pay for the construction and operation of a commercial wind turbine. increasing the overall positive impact on the environment. ▫ A nation or business entity that has reduced its carbon emissions significantly below a set level may sell the offset as carbon credits to another entity that has yet to reduce its carbon emissions to the required level.
planted forests and other that produce higher level of pollution. This transition may take place within the economy or may take the form of international transition. There are two types of carbon trading namely emission trading and offset trading. . Each Auuex-I has been assigned fixed amount in Kyoto protocol agreement.e. • Carbon trading is a new mechanism designed to allow firms that fail to meet the emission standards set by the 1997 Kyoto protocol. This amount is actually the amount of emission which is to be reduced by the concerned country. to buy credits from other firms that meet their target The Kyoto Protocol also envisaged carbon credit trade between countries with carbon sinks i.• Carbon trading is the name given to the exchange of emission permits.
The units are expressed in terms of carbon equivalent.• Such fixed amount implies that the country is permitted to emit the remaining amount. • Another variant of carbon credit is to be earned by a country by investing some amount in such project. Each unit gives the owner the right to emit one metric tone of carbon dioxide or other equivalent green house gases. The exchange of first variant of carbon credit is known as emission trading or cap-and trade whereas exchange of second variant of carbon credit is termed as offset trading. It is one of the ways through which countries can meet their obligation under the Kyoto Protocol. known as carbon projects which will emit lesser amount of green house gas in the atmosphere. The total amount of allowance is then subdivided into certain units. . This emission allowance is actually one kind of carbon credit.
Emissions Trading Scheme. created in conjunction with the Kyoto Protocol. it took effect in 2005. Asian countries are biggest sellers and western countries are biggest buyers.• The world's only mandatory carbon trading programme is the European Union. . The world watch Institute drawing from various studies. and it caps the amount of large installations. such as power plants and factories in the European Union countries. places the value of the trade at about 60 billion dollars in 2007. • Global carbon trading has gained momentum.
India also ranks first in registration of CDM projects followed by Brazil. • The growing Indian economy and its diverse sectors offer huge potential for emission reduction. Mexico and China. More than a hundred projects from India have been issued CERs for a total of 25 million. the average six of the CDM projects from India is 3000-5000 CERS per annum per project. The energy efficiency and industrial process were other sector. The large scale CDM development in India is due to the fact that the country is endowed with skilled human resources to handle this task. About 740 million CERs are expected from registered projects till 2012. India has also offered the largest number of CDM projects so far to the CDM Executive Board. Most of the CDM projects in renewable energy sector. . However. India has also taken a highly proactive approach to CDM from the very beginning and playing a major role in the design of the mechanism and its modalities.• India is considered a major supplier of certified emission reductions because of the largest number of projects registered with the clean development mechanism.
and • – Also includes re-powering. eg. who have emission reduction targets to achieve & find it cheaper to buy „offsetting‟ certificate rather than do a clean-up in their backyard. for example. controls. which are being applied for CDM and which can be of valuable potential. switch to electric cars or fuel cell vehicles (CNG/Bio fuels) • – Switch of transport mode. upgrading instrumentation. changing to less carbon intensive means of transport like trains (Metro in Delhi). like power utilities. are: • Energy efficiency projects • – Increasing building efficiency (Concept of Green Building/LEED Rating). Technopolis Building Kolkata • – Increasing commercial/industrial energy efficiency (Renovation & Modernization of old power plants) • – Fuel switching from more carbon intensive fuels to less carbon intensive fuels. and/or equipment • Transport • – Improvements in vehicle fuel efficiency by the introduction of new technologies • – Changes in vehicles and/or fuel type. e.g. Type of projects.CDM PROJECT TYPES • Carbon Credits are sold to entities in Annex-I countries. and • – Reducing the frequency of the transport activity .
• Methane recovery • – Animal waste methane recovery & utilization • • Installing an anaerobic digester & utilizing methane to produce energy • – Coal mine methane recovery • • Collection & utilization of fugitive methane from coal mining. • – Capture of biogas • • Landfill methane recovery and utilization • – Capture & utilization of fugitive gas from gas pipelines. • – Methane collection and utilization from sewage/industrial waste treatment facilities • Industrial process changes • Any industrial process change resulting in the reduction of any category greenhouse gas emissions .
g. for industrial purposes or heating (e. Distillery-Molasses) • Agricultural sector • – Energy efficiency improvements or switching to less carbon intensive energy sources for water pumps (irrigation) • – Methane reductions in rice cultivation • – Reducing animal waste or using produced animal waste for energy generation (see also under methane recovery) and • – Any other changes in an agricultural practices resulting in reduction of any category of greenhouse gas emissions . such as exhaust from gas turbines.• Cogeneration • Use of waste heat from electric generation.
The total amount of credits cannot exceed the cap. Countries which have companies having higher credits will enable them to sell the credits in the international market. • A central authority (in our case CDM India. Say a company in India can prove it has prevented the emission of x-tonnes of carbon. Companies that pollute beyond their allowances must buy credits from those who pollute less than their allowances or face heavy penalties. Companies or other groups that emit the pollutant are given credits (CERs – Certified Emission Reductions) or allowances which represent the right to emit a specific amount. . broker and macro-manager of international fund flows. This transfer is referred to as a trade. it can sell this much amount of points (or carbon credits) to a company in say. The development of a carbon project that provides a reduction in Greenhouse Gas emissions is a way by which participating entities may generate tradeable carbon credits. while the seller is being rewarded for having reduced emissions. an authority under the Ministry of Environment and Forests) sets a limit or cap on the amount of a pollutant that can be emitted in a country. Thus companies that can easily reduce emissions will do so and those for which it is harder will buy credits which reduce greenhouse gasses at the lowest possible cost to society. limiting total emissions to that level.• Emissions trading is an administrative approach used to control pollution by providing economic incentives for achieving reductions in the emissions of pollutants. The World Bank has built itself a role in this market as a referee. the US which has been emitting carbons. In effect. the buyer is being fined for polluting.
largely driven by the trading of EUA (European Union Allowances). Companies which accumulate CERs sell them there in this market to interested buyers. followed by India with 12% share. • China is the largest seller in the CDM market with about 61% share. India approved about 513 (as of April 2007) projects with a potential to generate about 355 mn CERs (Certified Emission Reductions). EUA are the equivalent of CERs (Certified Emission Reductions).most notably the EU. with its European Union Greenhouse Gas Emission Trading Scheme (EU ETS) that began its operations on 1 January 2005. The international market for CERs has crossed the $30 bn mark in 2006. Each CER can trade for anywhere between $6 and $16 in the international market. .• There are a number of international markets -. • So far.
with the increasing ratification of Kyoto Protocol (KP) by countries and rising social accountability of polluting industries in the developed nations. one carbon credit is equivalent to one tonne of carbon dioxide or its equivalent greenhouse gas (GHG). The extension of KP shall be ratified by the current signatories of KP in their future meetings essentially to curb GHG emissions into the environment. The potential buyers of carbon credits shall be corporates in various Annexure I countries that need to meet the compliance prevailing in their countries as per the Kyoto Protocol or those investors who would like buy the credits and with the expectation of selling them at a higher price during the KP phase (2008-12). the carbon emissions trading is likely to emerge as a multibillion-dollar market in global emissions trading. . The recent surge in carbon credits trading activities in Europe is an indication of how the emissions trading industry is going to pan out in the years to come. the emission trading (ET) industry has come to life. • What is a carbon credit? Simply put.CARBON CREDITS – A MARKET OF THE 21st CENTURY • With growing concerns among nations to curb pollution levels while maintaining the growth in their economic activities. Carbon credits are “Entitlement Certificates” issued by the United Nations Framework Convention on Climate Change (UNFCCC) to the implementers of the approved Clean Development Mechanism (CDM) projects. And.
etc. New Zealand. • The major sources of supply are Non-Annexure I countries such as India.Sources of demand & supply • Emerging carbon credit markets offer enormous opportunities for the upcoming manufacturing/public utility projects to employ a range of energy saving devices or any other mechanisms or technology to reduce GHG emissions and earn carbon credits to be sold at a price. and Brazil. . China. • Other markets include Japan. The carbon credits can be either generated by project participants who acquire carbon credits through implementation of CDM in Non Annexure I countries or through Joint Implementation (JI) in Annexure I countries or supplied into the market by those who got surplus allowances with them. as currently European Union Emission Trading Scheme (EU ETS) is the most active market. Canada. The buyers of carbon credits are principally from Annexure I countries. They are: Especially European nations.
. project participants. Currently. manufacturing entities. policy risk. Keeping in view the various risks associated with carbon credits. public utilities. trading in futures contracts in carbon allowances has now become a reality in Europe with burgeoning volumes. etc. brokers. banks. and others actively participate in futures trading in environment-related instruments. many companies actively participate in the futures market to manage the price risks associated with trading in carbon credits and other related risks such as project risk. Currently. In fact.Trading In Carbon Credits • Emissions trading (ET) is a mechanism that enables countries with legally binding emissions targets to buy and sell emissions allowances among themselves. futures contracts in carbon credits are actively traded in the European exchanges.
natural gas. among others Some of the major price influencing factors: Supply-demand mismatch • Policy issues • Crude oil prices • Coal prices • CO2 emissions • Weather/Fuel prices • European Union Allowances (EUAs) prices • Foreign exchange fluctuations • Global economic growth . CER prices are influenced by various factors including EUA prices. electricity. crude oil prices.Price influencing factors • In Non-Annexure B countries (the developing countries) across the world. coal. the level of economic activities across Annexure I countries.
cover their probable downside in the physical market. it is rather inevitable that they pre-sell their potential credits in the futures market (preferably a domestic futures market. Under such a situation. which if not hedged would lead to reduced realization. has the potential of even making a CDM project unviable in the long term. including the supply-side risks starting from the DNA approval risk to the CER issuance risk in a complete CDM approval cycle.Risks associated with carbon credits • There are market. . Apart from these risks there are a host of other risks from both the supply and demand sides that the real market players confront with. to avoid forex risk attached to participation in a foreign exchange) and thereby. the realization of CER generators at times may not even cover the investment put in to generate the CERs and thus.and policy-related risks for CER (certified emission reduction)producers. face the aforesaid risks in large proportion. Given the long gestation period of CDM projects and the risks involved. Most CDM projects by their very nature take a long time to generate the CERs and hence.
Potential participants in carbon credits trading are as below Hedgers • Producers • Intermediaries in spot markets • Ultimate buyers Investors • Arbitragers • Portfolio managers Diverse participants with wide participation objectives • Commodity financers • Funding agencies • Corporates having risk exposure in energy products .
Currently.India as a potential supplier • India. In 2007. The number of expected annual CERs in India is hovering around 28 million and considering that each of these CERs is sold for around 15 euros. In value terms (INR). there has been a surge in number of registered projects in India. the total registered CDM projects are more than 300. . the expected value is going to be around Rs 2.101.500 crore.315 (around 34 million). a total of 160 new projects were registered with the UNFCCC indicating that more than half of all registered projects in India happened last year. being one of the leading generators of CERs through CDM. It is expected that with increasing awareness this would go further up in the future. Further. almost 1/3rd of the total CDM projects registered with the UNFCCC. The total issued CERs with India as a host country till now stand at 34. Analysts forecast that its trading in carbon credits would touch US$ 100 billion by 2010. has a large scope in emissions trading. again around 1/3rd of the total CERs issued by the UNFCCC. on an average. it could be running into thousands of crores.
Various industries that have scope of generation of CERs • • • • • • • • Agriculture Energy ( renewable & non-renewable sources) Manufacturing Fugitive emissions from fuels (solid. oil and gas) Metal production Mining and mineral production Chemicals Afforestation & reforestation .
The role of MCX • With MCX keen to play a major role on the emission front by extending its platform to add carbon credits to its existing basket of commodities with regard to commodities futures trading. With India supposed to be a major supplier of carbon credits. the tie-up between the two exchanges is expected to ensure better price discovery of carbon credits. the existing and potential suppliers of carbon credits in India have geared up to generate more carbon credits from their existing and ongoing projects to be sold in the international markets. . besides covering risks associated with buying and selling.
eliminating the laborious process of identifying either buyers or sellers with enough credibility. There is no counterparty risk as the Exchange guarantees the trade. currently only bilateral deals and trading through intermediaries are widely prevalent leading to sellers being denied fair prices for their carbon credits. reduce costs of implementation. Advantages that the MCX platform offers are: Sellers and intermediaries can hedge against price risk. which has kept sellers at the receiving end with no bargaining power. • • • • • . thus. The price discovery on the Exchange platform ensures a fair price for both the buyer and the seller. there is no transparency related to prices in the Indian carbon credit market. At present. Players are brought to a single platform. Advance selling could help projects generate liquidity and thereby.Advantages of an MCX carbon contract • In India. and The MCX futures floor gives an immediate reference price.
2005. Japan. methane. factories or farm owner in India can get linked to United Nations Framework Convention on Climate Change and know the „standard‟ level of carbon emission allowed for its outfit or activity. A carbon credit is a tradable certificate or permit representing the right to emit one ton of carbon dioxide or carbon dioxide equivalent (CO2-e). . nitrous oxide and even water vapor) have voluntarily decided that they will bring down the level of carbon they are emitting to the levels of early 1990s. The treaty requires the industrialized countries to reduce their collective emissions of greenhouse gases by 5.2 percent (compared to the year 1990) by 2012. In 2008. these developed countries have decided on different norms to bring down the level of emission fixed for their companies and factories. India. had said that they will bring down the level in the period from 2008 to 2012. The Kyoto Protocol has created a mechanism under which countries that have been emitting more carbon and other gases (greenhouse gases include ozone. This is called carbon credit. Developed countries. China and some other Asian countries have the advantage because they are developing countries. carbon dioxide. Any company. in December 1997. mostly European. and the agreement came into force on February 16. The extent to which I am emitting less carbon (as per standard fixed by UNFCCC) I get credited in a developing country. The treaty was negotiated in Kyoto.CARBON CREDIT IN INDIA • The concept of carbon credits evolved from the Kyoto Protocol Treaty under the UNFCCC (United Nations Framework Convention on Climate Change).
Joint Implementation (JI) and International Emission Trading (IET). defined in Article 12 of the Protocol. Of these. . JI and IET are executable amongst developed countries while CDM is between developed and developing countries. three flexibility mechanisms were developed to help developed countries meet their emission reduction targets namely. Clean Development Mechanism (CDM). It is a mechanism allowing industrialized countries with a greenhouse gas reduction commitment to invest in emissionreducing projects in developing countries. • Clean Development Mechanism Explained: • The Clean Development Mechanism (CDM). allows a country with an emission-reduction or emission-limitation commitment under the Kyoto Protocol (Annex B Party) to implement an emission-reduction project in developing countries.• Three Flexibility Mechanisms: • As part of the agreement.
000 crore) over a period of time. India‟s carbon market is one of the fastest growing markets in the world and has already generated approximately 30 million carbon credits. The carbon trading market in India is growing faster than even information technology. So. It is expected that India will gain at least $5 billion to $10 billion from carbon trading (Rs 22. bio technology and BPO sectors. The Indian government has not fixed any norms nor has it made it compulsory to reduce carbon emissions to a certain level. people who are coming to buy from Indians are actually financial investors. It is the first exchange in Asia to trade carbon credits.000 million are in the pipeline.Carbon Trading in India: • Indian industries were able to cash in on the sudden boom in the carbon market making it a preferred location for carbon credit buyers. They are thinking that if the Europeans are unable to meet their target of reducing the emission levels by 2009 or 2010 or 2012. However. Carbon is also now being traded on India‟s Multi Commodity Exchange. the second highest transacted volumes in the world. Nearly 850 projects with an investment of Rs 650. then the demand for the carbon will increase and then they may make more money. . India being a developing country has no emission targets to be followed. she can enter into CDM projects.500 crore to Rs 45. Also India is one of the largest beneficiaries of the total world carbon trade through the Clean Development Mechanism claiming about 31 per cent (CDM).
This ordinance has to be passed by the Parliament and is expected to come up for consideration this year. Futures contract is a standardized contract between two parties to buy or sell a specified asset of standardized quantity and quality at a specified future date at a price agreed today (the futures price). However a government notification on January 4th paved the way for future trading in CER by bringing carbon credit under the tradable commodities. 1952. Under the present provision of the Forward Contracts Regulation Act. • . These types of contracts are only applicable to goods which are in the form of movable property other than actionable claims. The Union Cabinet on January 25. This Bill also amends the definition of „forward contract‟ to include „commodity derivatives‟. 1872. . To rectify this The Forward Contracts (Regulation) Amendment Bill 2006 was introduced in the Indian Parliament. money and securities. The contracts are traded on a future exchange. The National Commodity and Derivative Exchange by a notification and with due approval from Forward Market Commission (FMC) launched Carbon Credit future contact whose aim was to provide transparency to markets and help the producers to earn remuneration out of the environment projects. Forward contracts in India are governed by the Indian Contract Act.Legal aspect of Carbon Trading in India: Commodity exchange started future trading on January 2008 after • The Multi • Government of India recognized carbon credit as commodities on 4th January. the trading of forward contracts will be considered as void as no physical delivery is issued against these contracts. 2008 approved the ordinance for amending the Forward Contracts (Regulation) Act. Currently the definition only covers „goods‟ that are physically deliverable. Carbon credit in India is traded on NCDEX only as a future contract.
The Commissioner of Trade and Taxes has declared that the nature and aspects of Carbon credits have to be examined and tested against the definition of goods to arrive at the conclusion that carbon credit are no different from ordinary commodities bought and sold in the market and thus a sale transaction of carbon credit would attract value added tax on sale. .Value Added Tax • The government of Delhi in a recent notification has declared that the Certified Emission Reductions (or 'Carbon Credits' as we know) are to be considered as goods and thus their sale is liable to value added tax in the State.
• . then the demand for the carbon will increase and then they may make more money. 2010 or 2012. Only those Indian companies that meet the UNFCCC norms and take up new technologies will be entitled to sell carbon credits. • On 11th April 2008. People here are getting price signals for the carbon for the delivery in next five years. So investors are willing to buy now to sell later. They are thinking that if the Europeans are unable to meet their target of reducing the emission levels by 2009. • Multi Commodity Exchange (MCX). There are parameters set and detailed audit is done before you get the entitlement to sell the credit. people who are coming to buy from Indians who are actually financial investors. If the Indian buyer thinks that the current price is low for him he will wait before selling his credits. Every year. There is a huge requirement of carbon credits in Europe before 2012. This means that Indian Companies can now get a better trading platform and price for CERs generated. but most people will wait until December because that is the time to meet the norms in Europe. India now has two Commodity exchanges trading in Carbon Credits. the contract expires and at that time people who have bought or sold carbon will have to give or take delivery. So. The initiative makes it Asia's first-ever commodity exchange and among the select few along with the Chicago Climate Exchange (CCE) and the European Climate Exchange to offer trades in carbon credits. has launched futures trading in carbon credits. The Indian exchange also expects its tie-up with CCX which will enable Indian firms to get better prices for their carbon credits and better integrate the Indian market with the global markets to foster best practices in emissions trading. National Commodity and Derivatives Exchange (NCDEX) also has started futures contract in Carbon Trading for delivery in December 2008.• • Trading of CERS: As a welcome scenario. The exchange is only for Indians and Indian companies. They can fulfill the deal prior to December too. India‟s largest commodity exchange. • MCX is the futures exchange. in the month of December. The Indian government has not fixed any norms nor has it made it compulsory to reduce carbon emissions to a certain level.
It was a bilateral deal. the price to sell carbon credits at was not available on a public platform. Emit less and increase/add to your profit. These management consultancies then scouted for buyers to sell carbon credits. The price range people were getting used to was about Euro 15 or maybe less per tonne of carbon. Therefore. one tonne of carbon credit fetches around Euro 22. Today. .How does MCX trade carbon credits? • Many companies did not apply to get credit even though they had new technologies. Some companies used management consultancies to make their plan greener to emit less GHG. you emit one tonne less and you get Euro 22. It is traded on the European Climate Exchange. • However.
Some were getting Euro 15 and some were getting Euro 18 through bilateral agreements. if the Indian buyer thinks that the current price is low for him he will wait before selling his credits. Say. So. When the contract expires in December. • On MCX we already have power. They need better technology to emit less carbon. There are parameters set and detailed audit is done before you get the entitlement to sell the credit. in the month of December. They can fulfill the deal prior to December too. They are thinking that if the Europeans are unable to meet their target of reducing the emission levels by 2009 or 2010 or 2012. • Every year. . People can judge if they want to hold on to their accumulated carbon credits or sell them now. people who are coming to buy from Indians are actually financial investors. it is expected that prices will be firm up then. These companies are high-energy consuming companies. In India. People here are getting price signals for the carbon for the delivery in next five years. There is a huge requirement of carbon credits in Europe before 2012. Till MCX came along.• MCX decided to trade carbon credits because they are in to futures trading. This exchange is only for Indians and Indian companies. the contract expires and at that time people who have bought or sold carbon will have to give or take delivery. these companies were not getting best-suited price. then the demand for the carbon will increase and then they may make more money. • Only those Indian companies that meet the UNFCCC norms and take up new technologies will be entitled to sell carbon credits.MCX is the futures exchange. but most people will wait until December because that is the time to meet the norms in Europe. energy and metal companies who are trading. already 300 to 400 companies have carbon credits after meeting UNFCCC norms. The Indian government has not fixed any norms nor has it made it compulsory to reduce carbon emissions to a certain level. So investors are willing to buy now to sell later.
Financing Support in India: Carbon Credits projects requires huge capital investment. • The agreement initially earmarks a $10-million aid in World Bankmanaged carbon finance to IDFC-financed projects that meet all the required eligibility and due diligence standards. IDBI has entered into formal arrangements with multi-lateral agencies and buyers of carbon credits like IFC. wherein IDFC will handle carbon finance operations in the country for various carbon finance facilities. As part of the agreement. Washington. KfW. Germany and Sumitomo Corporation. Japan and reputed domestic technical experts like MITCON. • HDFC Bank has signed an agreement with Cantor CO2E India Pvt Ltd and MITCON Consultancy Services Limited (MITCON) for providing carbon credit services. which provides all the services in the area of Clean Development Mechanism/Carbon Credit (CDM). identifying and registering Clean Development Mechanism (CDM) and facilitating the buy or sell of carbon credits in the global market. • In order to achieve this objective. Realizing the importance of carbon credits in India. . • IDBI has set up a dedicated Carbon Credit desk. HDFC Bank will work with the two companies on awareness building. • The World Bank has entered into an agreement with Infrastructure Development Finance Company (IDFC).
• Post-2012 policies are expected to open many new gates for India to leverage the growing carbon market. This will build confidence in the market. the buyers based in European market are not permitted to enter the market. India has huge number of carbon credits sellers but under the present Indian law. it still does not have a proper policy for trading of carbons in the market. is the need of the hour. which would define the regulation on carbon credits trading and introduce options based on them. it is important that a special statue be created for this purpose as the Indian Contracts Act is not enough to govern the contractual issues relating to carbon credits. However. and trade volumes will be back on track for the Indian commodity exchanges. The government bodies are also planning for a domestic energy efficiency cap-and-trade scheme. As a result the Centre has been asked by The National Commodity and Derivatives Exchange Limited (NCDEX) to put in place a proper policy framework for allowing trading of certified emission reductions (CERs). The carbon credits market will grow to as much as $5 trillion if major countries such as the United States sign up for binding cap emissions. . • The Indian economy strictly needs a regulator for the carbon market.• Even though India is the largest beneficiary of carbon trading and carbon credits are traded on the MCX. The forward Contracts (Regulation) Amendment Bill. carbon credit. Also. in the market. India should be ready to take advantage of this growing global market. To increase the market for carbon trading Forward Contracts (Regulation) Amendment Bill has been introduced in the Parliament. This amendment would also help the traders and farmers to utilize NCDEX as a platform for trading of carbon credits. to unleash the true potential of carbon trading in India.
The company has made a claim of having saved 147 MT of CO2. This was made possible since their steel plant uses the Corex furnace technology which prevents 15 million tonnes of carbon from being discharged into the atmosphere. .EXAMPLES OF CARBON TRADING IN INDIA: • Jindal Vijaynagar Steel: The Jindal Vijaynagar Steel has recently declared that by the next ten years it will be ready to sell $225 million worth of saved carbon. • Powerguda in Andhra Pradesh: The village in Andhra Pradesh was selling 147 tonnes equivalent of saved carbon dioxide credits. This was done by extracting bio-diesel from 4500 Pongamia trees in their village.
DMRC has earned the carbon credits by using regenerative braking system in its trains that reduces 30% electricity consumption. Whenever a train applies regenerative braking system. the released kinetic energy starts a machine known as converter-inverter that acts as an electricity generator.• Handia Forest in Madhya Pradesh: In Madhya Pradesh. it is estimated that 95 very poor rural villages would jointly earn at least US$300. This translates to Rs 1.000 CERs for a 10-year crediting period beginning December 2007 when the project was registered by the UNFCCC. DMRC can claim 400.000 hectares of degraded community forests.000 every year from carbon payments by restoring 10. which supplies electrical energy back to the Over Head Electricity (OHE) lines. .2 crore per year for 10 years. This regenerated electrical energy that is supplied back to the OHE that is used by other accelerating trains in the same service line. • Delhi Metro Rail Corporation (Dmrc): It has become the first rail project in the world to earn carbon credits because of using regenerative braking system in its rolling stock.
• India has the highest number of CDM projects registered and supplies the second highest number of Certified Emission Reduction units. The Union government has approved 550 projects complying the Kyoto Protocol to earn carbon credits. . India is already a strong supplier of Carbon Credits and can improve on it. The other 330 projects are at the design document stage. The Designated National Authority (DNA) has registered the approved projects with the United Nations Framework Convention on Climate Change (UNFCC). Hence. accredited to the UNFCCC for conducting the third party verification of projects. and 330 more are awaiting the government's approval. DNV is an Oslo-based consultancy firm. which have adopted the clean development mechanism (CDM) to comply with the Kyoto Protocol.
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