Energy audit

Clean Development Mechanism

and
Carbon Credits protocol
 Kyoto Protocol
The Kyoto Protocol (herein-after mentioned as the protocol) is a protocol to the international UNFCCC with the
objective of reducing GHGs that cause Climate Change.

The treaty was negotiated in Kyoto, Japan on 11th December 1997, at the Third Conference of Parties (COP 3), opened
for signature from 16th March 1998 and closed on 15th March 1999.

The Protocol came into force on 16th February 2005.

Countries that ratify this protocol commit to reduce their emissions of carbon dioxide and five other GHGs targeted by
the protocol, or engage in emission trading if they maintain or increase emissions of these gases

Protocol hightlights:
• As of November 2007, 175 parties have ratified the protocol.
• India acceded to the Kyoto Protocol on 26th August 2002.
• As of December 2007, U.S. and Kazakhstan are the only signatory nations not to have ratified the protocol.
The target covers emission of the six main greenhouse gases, namely:
• Carbon dioxide (CO2)
• Methane (CH4)
• Nitrous oxide (N2O)
• Hydrofluorocarbons (HFCs)
• Perfluorocarbons (PFCs) and
• Sulphur hexafluoride (SF6)
 Carbon Credits
What are carbon credits?

Carbon credits are a key component of national and international emission trading
schemes that have been implemented to mitigate global warming.

Credits can be exchanged between businesses or bought and sold in international

markets at the prevailing market price.

Credits can be used to finance carbon reduction schemes between trading partners and
around the world.

Symbolically: 1 CER= 1 tonne of CO2 (or equivalent gases)

• The “currency” for this trade is called Carbon Emission Reduction (CER) commonly
called as Carbon Credits.

• One unit of CER is equivalent to the reduction of one metric tonne of CO2 or its
equivalent.
Carbon Credits have been given the recognition of an intangible commodity and can be traded
on the commodities market.

Trading of carbon credits happens in the form of CERs or Certified Emissions Reductions. CERs
are in the form of certificates, just like a stock.

A CER is given by the CDM Executive Board to projects in developing countries to certify that
they have reduced greenhouse gas emissions by one tonne of carbon dioxide per year

For example:

If a project generates energy using wind power instead of burning coal, and in the
process saves, say 25 tonnes of carbon dioxide per year,

it can claim 25 CERs (One CER is equivalent to one tonne of carbon dioxide reduced).
 Economic Analysis
The value of a system utilizing solar energy, directly or indirectly be judged on the basis of its economy.

Initial and annual cost.

 A solar system never designed to meet the complete energy demand of the
application for which it is installed.
 Providing a system supply 100 percent of the energy requirement at all times would
result in a system is oversized for most of the time.
 The resulting initial cost would make the investment uneconomical.
 A solar system is thus often used in conjunction with auxiliary system using
convention energy.
 This auxiliary source helps to meet unusual high demand situation. It also take care
the situation when solar energy is not available in adequate because of adverse of
weather condition.
 Initial cost
 The initial cost of a solar system is the cost buying the equipment and installing it.
 It is the sum of the two component - a fixed cost and a variable cost
C = Cf+ Cv Cf=fixed cost and Cv= variable cost
 The fixed cost refers to the cost of sensor devices, control equipment
 The variable cost varies in proportion to the systemoutput.
Clean Development Mechanism (CDM):
• In Clean Development Mechanism (CDM), a developed country can 'sponsor' a greenhouse gas
reduction project in a developing country where the cost of greenhouse gas reduction project
activities is usually much lower, but the atmospheric effect is globally equivalent.

• The developed country would be given credits for meeting its emission reduction targets, while
the developing country would receive the capital investment and clean technology or
beneficial change in land use.