Introduction

Our earth is undoubtedly warming. This warming

is largely the result of emissions of carbon dioxide

and other Greenhouse Gases (GHGs) from human
activities including industrial processes, fossil fuel
combustion, and changes in land use, such as
deforestation etc. Addressing climate change is
not a simple task. To protect ourselves, our
economy, and our land from the adverse effects
of climate change, we must reduce emissions of
carbon dioxide and other greenhouse gases. To
achieve this goal the concept of Carbon Credit has
come into vogue.

Climate Change
Rapid Industrial Growth
Increased energy consumption
Increased CO2 and other GHG emissions
Global Warming due to increased concentration
of
GHG
Increase in sea
level

Changes in wind
And precipitation

Changes in crop
yields

What is Carbon Credit?

Carbon

credits are certificates issued to

countries that reduce their emission of GHG
(greenhouse gases) which causes global
warming.
Carbon credits are measured in units of
certified emission reductions (CERs). Each
CER is equivalent to one tonne of carbon
dioxide reduction.
Under IET (International Emissions Trading)
mechanism, countries can trade in the
international carbon credit market. Countries
with surplus credits can sell the same to
countries with quantified emission limitation
and reduction commitments under the Kyoto

How it Works?
CARBON CREDITS are generated by enterprises in the

developing world that shift to cleaner technologies

and thereby save on energy consumption,
consequently reducing their greenhouse gas
emissions. For each tonne of carbon dioxide (the
major Green house gases) emission avoided, the
entity can get a carbon emission certificate which
they can sell either immediately or through a futures
market, just like any other commodity.
The certificates are sold to entities in rich countries,
like power utilities, who have emission reduction
targets to achieve and find it cheaper to buy
'offsetting' certificates rather than do a clean-up in
their own backyard.
This trade is carried out under a UN-mandated
international convention on climate change to help
rich countries reduce their emissions.

What are the needs for

Credit
Carbon?
Greenhouse gases (GHG) are components of

the atmosphere that contribute to the

greenhouse effect.
Some greenhouse gases occur naturally in
the atmosphere, while others are the result
from human activities such as burning of
fossil fuels such as coal.
GHG include water vapor, carbon dioxide,
methane, nitrous oxide, and ozone.
Carbon exists in the Earth's atmosphere
primarily as the gas carbon dioxide (CO2).
The overall atmospheric concentration of
these greenhouse gases has been increasing
in recent decades, contributing to global

How Carbon Credit deals

with the Carbon emission
reduction?
The credit carbon mechanism was formalized
in the Kyoto protocol, an international
agreement between more than 170
countries, and the market mechanisms
were agreed through the subsequent
Marrakesh Accords.
The main aim of this agreement is to reduce
the carbon emission in the global
atmosphere to balance the natural
environment.

Kyoto protocol
Kyoto Protocol is an agreement made under the

United Nations Framework Convention on Climate

Change (UNFCCC)
The Kyoto Protocol is only binding 'industrialized
or 'developed countries.
The protocol commits developed countries to
specific targets for reducing their green house
emissions
Each country has a prescribed number of 'emission
units' which make up the target emission
The Kyoto Protocol provides mechanisms for
countries to meet their emission targets

Kyoto Protocol
Mechanisms:
KYOTO
PROTOCOL

ALLOWANCE
BASED

International
Emission Trading
(Between developed
countries)

PROJECT
BASED

Clean Development
Mechanism
(Developing &
developed countries)

Assigned amount
units (AAU)

Joint Implementation
(Between developed
countries)

Carbon Reduction
Units(CER)

Emission Reduction
Units(ERU)

International Emission
Trading (IET)
Emissions trading (ET) is a mechanism that

enables countries with legally binding emission

targets to buy and sell emissions allowances
among themselves.
Each country has a certain number of emission
allowances (amount of carbon dioxide it can
emit) in line with its Kyoto reduction targets.
The IET allows industrialized countries to trade
their surplus credits on the international carbon
credit market.

International Emission
Trading cont..

Emissions trading transfers "assigned amount

units" or AAU
The buyer will then use the credits to meet their
emissions targets
A global Carbon Market is estimated to be around
$30 billion
Currently, futures contracts in carbon credits are
actively traded in the European exchanges (ECX)
Many companies actively participate to manage
the risks associated with trading in carbon credits

Clean Development
Mechanism Technology transfer
&Project financing

Developed Countries

CDM

Developing Countries

Carbon credits

CDM cont..
The purpose of CDM is reduce to emissions and

also contribute to sustainable development in

developing countries
The CDM is administered by the CDM Executive
Board (CDM Board) which reports and is
accountable to the Conference of Parties (COP).
A Carbon emission reduction (CER) is given by
the CDM Executive Board
One CER is equivalent to one tonne of carbon
dioxide reduced

Joint Implementation:
Projects between industrialized nations to

earn emission offsets

It is done because of geographical or cost
implications
Emission reduction units (ERUs) created
through joint implementation is treated in the
same way as those from emissions trading

Carbon Emission
Reduction (CER) Source
of Generation
Industries like
Agriculture
Energy (renewable & non-renewable sources)
Manufacturing
Metal production
Mining and mineral production
Chemicals
Afforestation & reforestation

European Climate
Exchange(ECX)
ECX is the most liquid marketplace for trading CO2 EU

allowances

Conclusion
There is a great opportunity awaiting India in

carbon trading which is estimated to go up to $100

billion by 2010. In the new regime, the country
could emerge as one of the largest beneficiaries
accounting for 25 per cent of the total world
carbon trade, says a recent World Bank report. The
countries like US, Germany, Japan and China are
likely to be the biggest buyers of carbon credits
which are beneficial for India to a great extent.

Conclusion cont..
Thus, by going through the all the above details
about carbon credit we come to know that credit
carbon has both social as well as monetary
benefit .
As a part of nature it is our social responsibility
or our duty to give our participation to keep our
environment healthy and clean.

Thank you