WELCOME

CARBON TRADING

Presented By: Samal Luna Roll No 01 Rohan Kulkarni Roll No 16

Today’s Agenda…
Ø A Brief Background Ø UNFCCC Ø Kyoto Protocol Ø Clean Development Mechanism Ø What are Carbon Credits? Ø Trading in Carbon Credits Ø Copenhagen Summit- Excerpts Ø Road Ahead for India…

A Brief Background
Climate Change Rapid Industrial Growth Increased Energy Consumption Increased CO2 & other GHG’s Emission Global Warming due to increased concentration of GHG
Changes in Wind & Precipitation Changes in Crop Yields Increasing Sea Level

Global Warming- Disaster for Crop Yields

United Nations Framework Convention for Climate Change (UNFCCC)

The Primary goal UNFCCC was to stabilize the amount of greenhouse gases in the atmosphere at a level that prevents dangerous man-made climate changes. In 1990, the United Nations General Assembly decided to start work on a climate change convention. 154 countries signed the UNFCCC at the UN Summit in Rio de Janeiro in 1992. 193 countries including the USA have ratified the convention.

What does it say in the convention? Most countries have agreed to do something about climate change, but the industrialized countries have to do the maximum. Countries that have ratified UNFCCC will have to commit themselves to monitoring & reporting their emissions of GHG’s.

Countries behind UNFCCC
The countries behind the UNFCCC are divided into several partially overlapping groups: Annex I countries: ü 24 industrialised countries which in 1992 were members of the Organisation for Economic Cooperation and Development (OECD) ü 14 countries which at the time were in the middle of a transition from a centrally-controlled planned economy to a market economy ü European Union (EU) ü Total of 41 countries.

Annex II countries:
ü Annex II countries are the same as in Annex I apart from the transition economies. ü These countries undertake to pay a share of the costs of the developing countries’ reductions in emissions. For E.g. U.S, U.K, Germany, France, Japan, Australia.

Non-Annex I countries:
ü Developing countries that have ratified the convention. For E.g. : India, China, Brazil, Pakistan

ü
Observers:
üUN’s

development programme (UNDP) and environmental

programme (UNEP) are observers to the UNFCCC.
üOther

observers include the International Energy Agency

(IEA) and the confederation of oil-producing countries, OPEC.

Kyoto Protocol : An Overview
üMay 1992: UNFCCC established framework for containing global warming. üDec 1997: Following intense negotiation in Kyoto, Japan a protocol was agreed upon by over 100 countries. üFeb 2005: 141 countries, including EU, Japan, Canada, Russia signed the Kyoto Protocol and it got ratified w.e.f 16th Feb, 2005.
- The U.S remained a key non-signatory.

üDec 2009 : Total 194 countries ratified the protocol including the U.S.

Kyoto Protocol: The Gist…
The Kyoto Protocol sets legally binding targets for reducing GHG’s : - Annex I countries (Industrialized): To reduce GHG emissions by 5% below 1990 levels, by year 2012. - EU members committed to reduce their average emissions by 8%. - Annex II countries: To provide funding & transfer of technology to non- Annex I countries. - Non-Annex I (developing countries): No commitments.

Green House Gases
§ 6 GHG’s are regulated under the Kyoto Protocol üCarbon dioxide (CO2) üMethane (CH4) üNitrous oxide (N2O) üHydro fluorocarbons (HFC’s) üPer fluorocarbons (PFC’s) üSulphur Hexafluoride (SF’s) § 25 other gases, including chloroform, CO & water vapour that influence climate change

G’s are key ones that can be controlled by human intervention w

Kyoto Protocol: Issues & drawbacks
üShort Horizon: First phase of the protocol covers the period upto 2012.
- It will have to be further extended beyond 2012

üCountry targets defined, but division of that by industry & sector within countries not yet structured.

Clean Development Mechanism (CDM)
ü CDM is an arrangement under the Kyoto Protocol allowing industrialized countries with a greenhouse gas reduction commitment (called Annex 1 countries) to invest in ventures that reduce emissions in developing countries as an alternative to more expensive emission reductions in their own countries. ü Planned reductions would not occur without the additional incentive provided by emission reductions credits, a concept known as "additionality".

CDM Project Stages & Parties Involved
Design Validation Registration Implementation Monitoring & Reporting Approval Stakeholder Consultation

Verification Certification

Validation, Verification & Certification
Validation of project design, baseline and monitoring plan

GHG emissions [t CO2-eq ]

Emission baseline

Additional emission reductions

Verification/ Certification of emission reductions

With project emissions
Project implementation

Year

CDM Validation Process
Develop Project Documentation Validation Selection Validation Contract Validation Team Selection Establishment

EB Approval of Methodologies

Public Stakeholder Comment Process (30 days)

Preliminary Validation Report Background Investigations ine & Monitoring Methodology Check Document Review Follow-up Interviews

Final Requests Resolution of Corrective ActionValidation Report and Opinion EB Registration of project

What are Carbon Credits?
ü Permit that allows the holder to emit one ton of carbon dioxide. ü Credits are awarded to countries or groups that have reduced their green house gases below their emission quota. ü These are “Entitlement Certificates” awarded by UNFCCC to the implementers of CDM projects.

1 Carbon Credit = 1 Ton of CO2 or its equivalent GHG Emission

Types of Carbon Credits
Carbon Offset Credits (COC) Carbon Reduction Credits (CRC’s)

orage of Carbon energy production, wind, solar,bio-sequestration (refores clean forms of from our atmosphere through hydro and bio fuels.

Emission Reduction Purchase Agreement (ERPA)
 

Transaction that transfers carbon credits between two parties under the Kyoto Protocol.

Buyer pays the seller cash in exchange for carbon credits, thereby allowing the purchaser to emit more carbon dioxide.

Trading in Carbon Credits
Emissions trading (ET) is a mechanism that enables countries with legally binding emissions targets to buy and sell carbon credits among themselves.  World Carbon Exchanges:  i. Chicago Carbon Exchange, U.S  ii. European Carbon Exchange, London  iii. MCX Commodities Exchange, Mumbai Some of the Carbon Financial Instruments are:  1. Futures Trading  2. Spot Trading

Price Influencing Factors
Demand-Supply Mismatch Government Policy Issues Crude Oil Prices Coal Prices Weather/Fuel Prices Foreign Exchange Prices Global Economic Growth/Activity

Copenhagen Summit 2009

Representatives of 192 countries met to try & hammer out an agreement that will save out the planet from the fallouts of global warming and climate change…

Copenhagen Accord

It sets the goal of keeping rise in Global temperature within 2 degree Celsius to be able to deal with challenges of the Global warming. It aims at raising US$ 100 billion per year by developed countries by 2020, to help poor countries adapt to climate change. It sets to reduce deforestation in return for cash from developed countries.

xt Climate Change Summit to be held in Mexico in December 201

Road Ahead for India…

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