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Emission Trading


Greenhouse Effect

Earth receives energy from
the Sun in the form of
Part of this energy (appx
30%) is radiated back in the
form of infrared radiation
Much of this radiation is
absorbed by atmospheric
gases such as CO2, Water
vapour and other gases, and
reradiated towards the
surface as more heat.


Greenhouse effect continues ………

Warming of the Earth's surface and lower
atmosphere caused by this absorption is known
as Greenhouse effect.
An increase in atmospheric concentrations of
gases such as CO2, NO2, Methane and chlorofloro-carbons resulting from human activities
may also intensify the greenhouse effect.


Greenhouse gases

Water vapor, CO2, NO2, Methane and chlorofloro-carbons causing greenhouse effect may
be called as Greenhouse gases (GHG) and
their effect is,

Water Vapour 36-70%
Carbon dioxide 9-26%
Methane 4-9%,


Greenhouse gases continues…..

Water vapor is a naturally occurring
greenhouse gas and human activity does not
directly affect its concentration.
CO2, NO2 and three groups of fluorinated
gases (SF6, HFCs and PFC) are considered as
major greenhouse gases* under Kyoto

*caused by human activities- industrial processes, power generation,
agriculture byproducts etc.,


Kyoto Protocol  1997-Dec-11: An agreement made under UNFCCC to reduce emission levels of GHGs (UNFCC-United Nations Framework Convention on Climate Change)    Come into force on 2005-Feb As of 2007-Nov.(Developing CountriesIndia comes into this) 6 . 174 Countries include Annex I (Industrially developed countries + European Union) and Non-Annex Countries. 174 countries/parties have ratified the protocol.

Expires in 2012 7 . US and Kazakhstan are the only signatory nations not to have ratified the act.     Annex I countries commit to reduce their emissions of GHGs by collective average of 5..2% from 1990 levels by the period 2008 to 2012 Non-Annex countries have no GHG emission reduction As of 2007-Dec.Kyoto Protocol Continues….

8 .Kyoto Protocol Continues…..

plants and the oceans which absorb the greenhouse gases) Joint fulfillment—(Joint agreements by countries to reduce emissions) Joint implementation (JI) Present Clean development mechanism (CDM) interest of Emission Emissions trading (ET) reduction projects 9 .Emission reduction mechanisms [1]  Kyoto Provides six different options to meet individual emission reduction targets.       Policies and measures—government regulations Sinks enhancement—(sinks are natural features like forest cover.

Emission reduction mechanisms continues… Kyoto Mechanisms Market Based Project Based Emission trading Joint Implementation Clean Development Mechanism 10 .

nic. biomass.jsp 11 .Project based mechanisms   JI is an arrangement in industrialized countries to invest in emission reducing projects* in another industrialized country (where costs of emission reductions are significantly lower) as an alternative to emission reductions in their own countries The CDM is an arrangement allowing industrialized countries with a GHG reduction commitment to invest in emission reducing projects* in developing countries as an alternative to more expensive emission reductions in their own countries. waste to energy. Reforestation etc—ref * Power generation from renewable energy sources.

Emission trading markets are developing that bring buyers and sellers of carbon credits together with standardized rules of trade.Market Based-Emission Trading   Emission trading is a market based mechanism for helping to mitigate the increase of CO2 in the atmosphere. 12 .

Greenhouse gas emissions are calculated in CO2equivalent metric tons (tCO2e). One unit of CER is one ton equivalent of carbon dioxide emission.Carbon Credits       Credits are awarded to countries or groups that have reduced their green house gases below their emission quota. Carbon credits can be traded in the international market at their current market price. The ―currency‖ for this trade is called Carbon Emission Reduction (CER). CER prices now in the range of $8-15 per tCO2e (2007) [2] 13 .

Business  Buy and sell Carbon emissions through  Joint Implementation  Annex I parties (mostly developed countries) Clean Development Mechanisms    Non-Annex (India is here) and Annex I parties Emissions Trading  Global 14 .

business entities that reduce their carbon emission may be able to sell their reductions to other emitters 15 . Similarly.Who is selling?   Entities that manage forest or agricultural land might sell carbon credits based on the accumulation of carbon in their forest trees or agricultural soils.

Who is Buying?  Any entity. typically a business. that emits CO2 to the atmosphere may have an interest or may be required by law to balance their emissions by buying carbon credits. Eg: Power generating facilities 16 .

72% contribution is from CO2 17 .Global GHG Emissions from various sectors   Power generation ultilities are constituting the major GHG emissions.

18 .Power generation is the target      Power generation is a simpler target for government action than other CO2 sources. Emissions trading will most likely represent a central tool for a majority of actors in the energy sector Additional production cost will be added for electricity generation. 10 USD/MWh A typical natural gas fired generation plant would see less than that of coal based generation. A typical coal fired generation plant would be faced with an additional cost of apprx.

heat rate (GJ/kWh).the energy* (GJ/kg of fuel) and carbon (kg C/kg of fuel) content of the fuel..G) 19 . GJ. heat content depends upon the quality of the coal (coal has different grades from A…….Estimation of Carbon emission from a power generation utility [3]  CO2 emissions per unit of electricity generated depend upon. *Kg C – kilogram of Carbon.Giga Joule. Characteristics of power plant -.   Characteristics of the fuel -.

8 kg C/GJ 20 .8 kg C/GJ Carbon content of LNG = 15.CO2 emission Calculation CO2 emissions per unit of net electricity generated (kgC/kWh) = CarbonContentOfTheFu el (kgC / kgFuel)  HeatRateOf TheFuel (GJ / KWh ) HeatValueOfTheFuel (GJ / kgFuel) Carbon content of COAL = 25.

PPAs* are an authentic source of data on proposed/existing power plants. since they contain all the cost and power plant performance information agreed as a contractual requirement.Source of Data for Calculation    The data required for the calculation of CO2 emission per unit of power generation may be obtained from Power Purchase Agreements (PPA) of individual generating utilities. May be obtained from SEBs *prepared and filed to the regulatory commissions (SERC) and are not publicly available 21 .

22 .Source of data continues…..  PPA contains the following data.

Heat Rate and Emission  Heat rate (GJ/KWh)     Less heat rate reduces fuel consumption and carbon emission Renovation of old coal based power plants for heat rate improvements. NTPC to improve heat rates of all thermal power plants (owned by itself and SEBs) To adopt super critical technology. 23 .

24 .Utility Emission monitoring     Require gas analyzers for emission monitoring Require tools for calculations and reporting Spread sheets (MS-Excel) or S/W is required to be developed for this purpose (Data acquisition) Spread sheets are not reliable in view of    Data integrity Data security Data verifiability etc..

      Data acquisition Data validation Internal reporting External reporting Security Logging/Audit 25 .Emission monitoring S/W [4]  The monitoring and reporting S/W is required to have the following features.

S/W features*  Data acquisition     Sources of emission Mode of data retrieval (online) Support all GHG emission Data validation    Range checks Deviation reporting Unit of measured quantity * This information is obtained from websites of various organizations in this business 26 .

etc) Internal distribution of reports Forecasting Actual Vs Forecast Graphical views Automatic report generation 27 .S/W features continues….. Internal reporting       Reports for internal purpose (minute/hour/day/week..

.S/W features continues….  External reporting   Crystal reports license is required Reports may be exported to      PDF Excel XML Word CSV 28 .

 Security   User-ids and passwords for users Logging/Audit    Any manual changes of data Validation changes Summary of changes 29 ..S/W features continues….

30 . Unilateral CDM Projects    Developing countries make the project alone and sell CERs The selling of CERs is Emission Trading mechanism Bilateral CDM Projects:  Annex-I countries make CDM projects in developing countries.Carbon business in India   In India the buy and sell of carbon emissions is through CDM and ET mechanisms only.

India is signing off the year 2007 with over 21 million certified emission reduction (CERs) credits generated by clean development mechanism (CDM) projects during the year. Times of India.Carbon business continues….  India stands second in selling CERs (15%) after China (60%) from CDM projects (b/w Jan-Sept. that is. over 12 million CERs. 2006) [2]. 31 . 2 Jan 2008. This is nearly double compared to what was generated in 2006..

CDM projects) [2].65% of globally regd. *eg: Sugar. India register 219 CDM projects as on April 2007 (34.Carbon business – India….   Indian industries* are registering for CDM project development and to sell CERs later (when market prices up).. chemical industries making unilateral CDM projects 32 .

CDM Project Cycle [5]  Project Design Phase        Project opportunity and Feasibility Study Project Design Preparation of CDM documentation (PDD) Approval from National Authorities Comments from public Validation Registration  Project Implementation     Implementation and Monitoring Verification Certification Issue of CERs 33 .

Players Seller* Sellers are industries holding CERs for sale Buyer Consultant/ Service Provider/ Advisor Buyers are utilities seeking CERs (to buy) Consultant or advisor plays a different role for two different kinds of trading mechanisms (CDM and ET). *Holding CERs by having Unilateral CDM projects 34 .

Role of Advisor*  CDM Project         Feasibility study Project Design Document (PDD) preparation supporting Validation Process Obtaining Host Country Approval supporting Registration process Preparation of Monitoring Report Facilitating Verification & Issuance Process for CERs Aid in procuring clean technology equipments at very competitive delivery and price terms *This information has been obtained from web sites of various organization involved in this business. 35 .

Role of Advisor continues…  ET     To guide for right time of sale (Market study) Identification of buyers Analyzing the offers Emission reduction purchasing agreement (ERPA) 36 .

   DNAs of both countries approve in case of Bilateral CDM Only host country DNA approves in case of unilateral CDM Designated Operational Entity (DOE)  Independent accredited party   validation (during design phase based on PDD) verification (certifying after implementation of CDM assuring the projected emission reductions are achieved) 37 .Authorities  Designated National Authority (DNA)  DNA is the national authority to approve the CDM project proposal.

38 ..Authorities….  CDM Executive Board (CDM EB-UNFCCC)     Approves the CDM project after validation and approved by DNAs (registration) Issue CERs based on DOE verification and ERPA Accreditation of DOEs International Emission Trading Association (IETA)  ERPA (format) developed by IETA.

Consultant Verification/certification -.Documentation  The following documents are produced at various stages of CDM/Trading         PCN Consultant PDD DNA Approval Validation Report DOE Registration Monitoring report -.DOE Issue of CERs -.CDM EB/UNFCCC 39 .

Division of Zenith Corporate Services (P) Ltd Development Alternatives (NGO) Senergy Global IRG Systems South Asia Private Limited Sustainable Energy Solutions Pvt. Ltd. MITCON Consultancy Services Ltd. Ltd 40 . Ltd. Ernst & Young Tower Winrock International India (NGO) MECON Ltd. Emergent Ventures India Pvt. (EVI).Ltd Det Norske Veritas SGS India Private Limited BSI Management System Bureau Veritus Certification India Pvt. gtz International Service PWC  Indian DOEs        TUV / SUD Suddeutschland India TUV India Private Limited TUV Rheinland (India) Pvt..Who is in this business  Consultants             Zenith Energy.

Who….  Emission monitoring S/W       Pavilion Technologies Environmental Software Providers (ESP) Promasys Software EPM (Netherlands) Carbon Registry Services Ltd (CRS) TechniData 41 .

42 .CER Calculation [14]  Emission reduction = BE– PE –L     BE-Baseline Emissions PE-Project emissions L-Leakage BE=EW X GEF   EW-Energy wheeled to the grid in KWh by the CDM project GEF-Grid emission factor in tCO2/KWh GEF  ( wOM  EFOM )  ( wBM  EFBM )   Emission factor is calculated as weighted average of Operating Margin and Build Margin emission Factors The values of wOM and wBM depends upon the type of the CDM project.

…  Types of CDM projects  Methane recovery    CO2 projects    Landfill gas Industrial waste water treatment Wind. Solar.CER calculation contd. SHP Utilization of waste heat and gas for power generation HFC-23 and N2O destruction 43 .

EFOM (Operational Margin)   EFBM (Build Margin)   Effect of modifying the operation of existing power plants connected to the grid Effect of delaying the addition of new plants to the grid A minimum of 3 years of historical power generation data is required.CER calculation contd.…  Baseline emission   Electricity delivered to the grid by the project would have otherwise been generated by the operation of grid-connected power plants and by the addition of new generation sources. 44 . as reflected in the combined margin (CM).

EFOM  EFOM may be calculated by using following methods  Simple OM  Simple Adjusted OM  Dispatch data Analysis OM  Average OM 45 .

i .OXID i y. it should also be included 46 in this list .Amount of fuel in kg COEF. y EFOM .Simple OM  The Simple OM emission factor is calculated as the generationweighted average emissions per electricity unit (tCO2/MWh) of all generating sources serving the system. y i.EFCO2 . y j COEFi  NCVi . not including low-operating cost and must-run power plants*  F COEF   GEN i. j j. geothermal. wind. If coal is obviously used as must-run. j. nuclear and solar generation.year for which EF is calculated i.CO2 emission coefficient (tCO2/kg Fuel) GEN-electricity generated in MWh NCV. low-cost biomass. j calorific value of fuel (GJ/kg Fuel) EFCO2-emission factor (CO2/GJ) OXID-Oxidation factor *Low operating cost and must run resources typically include hydro.type of fuel j-power source F.

j.y k No.Simple Adjusted OM This emission factor is a variation on the previous method. y EFOM .k i .k k. where the power sources (including imports) are separated in low-cost and must-run power sources (k) and other power sources (j)   F COEF  (1   )  GEN i.k . j i.ofHoursForWhichLow  CostAndMustRunSourcesAreOnM arg in 8760 47 . y j   y  F COEF  GEN i . j y j. y i . y i.

h n 48 . emissions per MWh (tCO2/MWh) n.h EFDD.Generation of CDM project (MWh) EOM.h – generation Weighted avg.Dispatch Data Analysis OM EFOM .y – emissions EFDD.EFDD.n.n i . y EGy EOM .h i .n n. y  EOM . y   EGh .h EGy.set of power plants in the top 10% of the grid system dispatch order during hour h h  F COEF   GEN i .

j. y i. j i. y EFOM . j j. including low-operating cost and must-run power plants  F COEF   GEN i. y j 49 .Average OM  The Average OM emission factor is calculated as the generationweighted average emissions per electricity unit (tCO2/MWh) of all generating sources serving the system.

m i .m. y m *at the time of PDD 50 .EFBM  Choose a sample group with larger annual generation:  the five power plants that have been built most recently* OR  the power plants capacity additions in the electricity system that comprise 20% of the system generation (in MWh) and that have been built most recently*  F COEF   GEN i . y i . y EFBM .m m.

CER calculation of a CDM project supplying western grid EFOM 51 .

EFBM  Group of power plants that constitutes 20 % of the system generation and have been built recently. 52 .

CERs of CDM project 53 .

September 2006. 7. TOEFY.References 1. The interaction between electricity. Debashish Biswas and Tirthankar Nag. IEA Symposium New York 54 . Proceedings Sardinia July 03. 1 . LANDFILL GAS CDM PROJECTS:CURRENT TRENDS AND FUTURE OPPORTUNITIES FOR DEVELOPING Paramdeep Singh. Pages 1900-1917 Arne Jakobsen. Energy Policy. Energy Policy. September 2006. P.R. 2. Pages 1619-1629 Getting the data right-A survey of information technology solutions to meet EU Emissions Trading Scheme requirements. www.and emissions trading markets. Thomas C.5 October 2007 3. 4. Italy. Volume 34. David G. Cagliari. J. Chi Zhang. Volume 34. S.enzenglobal. with a specific view on demand response. Margherita di Pula. 5. Baselines for carbon emissions in the Indian and Chinese power sectors: Implications for international carbon trading. Issue 13. Amol Phadkeb. Shashank Garimella. Eleventh International Waste Management and Landfill Symposium. AND A. LEE. Jayant Sathayea. Shukla. ―Cost of electric power sector carbon mitigation in India: international implications‖. www. Issue 14. 2006 C. Victor. Emissions Trading. Clean Development Mechanism for Biomass based Power Projects. BOGNER. 6. www.References. 14. Board/UNFCCC Revision to the approved consolidated baseline methodology ACM0002 ―Consolidated baseline methodology for grid-connected electricity generation from renewable sources‖ ACM0002 / Version 06 19 May 2006 55 . 9.wikipedia. 10.unfccc. CDM .emergent-ventures. 12.cdmindia.ieta.