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Carbon

Trading

Group 1
Climate Change and Global
Warming
Earth’s climate is warming and
human activities are primarily
responsible (>90% certainty)

280 to 430ppm concentration
between 1850 and 2000 (0.5-
0.8oC increase)

550ppm likely by 2035 with
77-99% chance of 2oC
increase 50% chance of 5oC
increase
Potential Impacts
The Kyoto Protocol
38 Developed Countries and
Economies in Transition (Annex B)
agreed in 1997 to

• Reduce GHG emissions by 5.2% below 1990
levels in the commitment period 2008-2012
• Total demand created for GHG Reductions:
~5 billion tCO2e, including the US
• Marrakech Accord: agreed on the rules of
implementation in November 2001
• KP came into force in 2005 February with
Russia ratifying the Protocol
What is meant by Carbon Trading (1 of 2):
 Carbon emissions trading is emissions trading
specifically for carbon dioxide (calculated in tonnes of
carbon dioxide equivalent or tCO2e) and provides a
way for countries to meet their obligations under the
Kyoto Protocol.

 Kyoto provides mechanisms to facilitate this trade:
 Emissions trading – known as ‘the carbon market’
 Clean development mechanism (CDM)
 Joint implementation (JI)
What is meant by Carbon Trading (2 of 2):

The countries that reduce their Carbon emissions
are primarily given economic incentives in the form
of:
 Emission Reduction Units (ERUs) in case of Joint
Implementation projects.
 Certified Emission Reduction Units (CERs) in case
of CDM Projects.

 These economic incentives can be used for
sustainable development of the host countries.
 The regulations on Emission Trading can be found
in Article 17 and in the paragraphs 3.10 and 3.11 of
the Kyoto Protocol

 Article 17:
"The Conference of the Parties shall define the relevant
principles, modalities, rules and guidelines, in particular for
The Law of Emission Trading
verification, reporting and accountability for emissions
trading. The Parties included in Annex B may participate in
emissions trading for the purposes of fulfilling certain
commitments (under Article 3). Any such trading shall be
supplemental to domestic actions for the purpose of meeting
quantified emission limitation and reduction commitments
under that article."
 Article 3.10:
"Any emission reduction units, or any part of an assigned
amount, which a Party acquires from another Party in
accordance with the provisions of Article 6 or of Article 17
shall be added to the assigned amount for the acquiring
Party."

The
 Article Law
3.11: of Emission Trading
"Any emission reduction units, or any part of an assigned
amount, which a Party transfers to another Party in
accordance with the provisions of Article 6 or of Article 17
shall be subtracted from the assigned amount for the
transferring Party."
How Carbon Trading Operates
Seller’s side (Host Buyer’s side
Country)

Domestic
Initiatives
Baseline emissions

Emission
Reductions (ERs)
Purchase of
ER Purchase of
ERs
$ ERs is
$ supplemental Emissions
Project emissions

to domestic target
Host country action
benefits
from technology and
financial flows

Baseline Scenario
Project Scenario
How Carbon Trading Operates
A company in Venezuela (a non Annex B
country) switches from coal power to biomass
The CDM board certifies that by doing this the
company has reduced Carbon dioxide emissions
by 200,000 tonnes per year
It is issued with 200,000 CER’s
These CERs are bought by The United
Kingdom (Annex B) for reducing its Kyoto target
from 1 million tonnes/year to 800,000 tonnes
per year
Money received in exchange is used by
Venezuela for its sustainable development
How Carbon Trading Operates (Simplified!)
Annex – B of Kyoto Protocol
Countries listed in Annex B of the UNFCCC can purchase CDM
credits.
Australia Hungary Portugal
Austria Iceland Romania
Belgium Ireland Russian Federation
Bulgaria Italy Slovakia
Canada Japan Slovenia
Croatia Latvia Spain
Czech Republic Liechtenstein Sweden
Denmark Lithuania Switzerland
Estonia Luxembourg Ukraine
European Community Monaco United Kingdom
Finland Netherlands United States of America
(Not Ratified)

France New Zealand New Zealand
Germany Norway
Greece Poland
Critical Concepts in CDM Projects
 Eligibility
Should lead to real, measurable and long term GHG
mitigation

 Sustainable development
Social, economic, environmental and technological well
being

 Baselines
 Which gases to reduce in what proportion
 Establish lifetime and boundaries of project
 Consider role of external factors (like social, economic and
environmental factors)
Overview of a CDM Project
The Market For Carbon Trading
In 1998 ----18mn tons CO2 traded
In 2004 ----107mn tons CO2 traded
In current year the volumes have already reached levels of
43mn tons of CO2 equivalent.

Buyers of Carbon Credits in 2003-04 & 2005(Jan-Apr)
40% 29% 32%
30%
30% 22% 21%
16%
20% 12%
6%5% 7%
10% 6% 4% 3%
3% 1% 3%
0%
U K Ne Ja US Au Ca N e Ot
t h pa A str na w he
er n a d
lia a Z ea r E U
lan
d lan
d

2003-04 2005(Jan-Apr)

Source -UNFCC
Sellers of carbon credits in 2003-04 and
2005 (Jan-April)
35% 31%
30% 26%
25% 23%22%
17% 2003-04
20%
14% 13% 14% 2005(Jan-Apr)
15% 12%
10% 9%
10% 6%
5% 3%
0%
0%

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Source-UNFCC
Instances of Carbon Trading from
India
Jangubai Self Help Group of Powerguda Village in
Adilabad District of Andhra Pradesh sold the
equivalent of 147 tons of CO2 costing $645 to the
World Bank in 2003.

Jindal Vijaynagar Steel declared to sell $225
million worth carbon(15mtons CO2) over the 10
years through Corex Furnace Technology.
Instances of Carbon Trading from
India
Canara Bank offered to provide cash subsidy for
solar water heater installations by trading certified
emission reduction with 37 industrially advanced
countries under the Kyoto Protocol.

More recently, Gorai dumping ground has
become the first garbage dump in the country to
win "carbon credits". The BMC has also managed to
sell these "carbon credits“ obtained by the
alternate use of the residual methane in the dump
ground.
Thank You