Project Report

(Submitted for the Degree of B. Com Honours in Accounting & Finance

Under the University of Calcutta)

CARBON CREDIT

Submitted by:

Name of the Candidate: ……………..……………………………..

Registration No: …………………………………………….

Roll No: ………………………………………………………………

Name of the College: ………………………………………………………………………..

Supervised by:

Name of the Supervisor: ………………………………………………………..

Name of the College: …………………………………………………………….

(FEBRUARY 2014)

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 ACKNOWLEDGEMENT

The success and final outcome of this project required a lot of

guidance and assistance from many people and I am extremely
fortunate to have got this all along the completion of my project
work. Whatever I have done is only due to such guidance and
attendance and I would not forget to thank them.

I respect and thank Our Vice principal for helping us choose the topic
of the project. I am really thankful and extremely thankful to him for
providing such a nice support and guidance though he had busy
schedule.

I owe my profound gratitude to Our Project Supervisor, Ms. Joyeta

Bhadury’s, who took keen interest on our project and guided us all
along, till the completion of our project work by providing all
necessary information and constant support.

I would like to thank Calcutta University for having included this

project work into the curriculum. This project work instigated in me
to learn many new things. Though I have tried my best to complete
this project and gain maximum as I could but there is still to learn
from it. I would also like thank all people who have directly and
indirectly helped me in this project.

All I have to say and express is a big THANK YOU!!!

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 INDEX

Chapter Topic Page no:

Cover Page 1
Acknowledgment 2
Index 3
1 Introduction 4-8

 Need of the study

 Literature study
 Objective
 Research methodology
 Limitation of the study
 Chapter planning

2 Conceptual framework & national and 9-22

international scenario

 Carbon Credit - Overview

 Kyoto Protocol
 Definition and origination
 Types of Carbon Credit
 Certified Emission Reduction
 Carbon Trading & Exchange
 Clean Development Mechanism
 Carbon Exchange
 Domestic & Global Scenario

3 Data Analysis & Findings 23-27

 CDM project In India – A Study

 Carbon Trading by Indian Companies
 Findings & Analysis

4 Conclusion and recommendations 28-29

Annexures & References 30-32

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 CHAPTER - 1

INTRODUCTION

Burning of fossils is a major cause of industrial green house emissions. The major GHG
(green house gas) emitted by these industries are carbon dioxide, methane, nitrous oxide,
hydro fluorocarbons (HFCs), etc. which all increase the atmosphere’s ability to trap infrared
energy and thus affect the climate.

This is causing the rapid climatic changes, much against our human nature and we are
getting adversely affected by such emissions. To address this issue of global warming, the
United Nations Framework Convention on Climate change (UNFCCC) was adopted in 1992,
with the objective of limiting the concentration of green house gases in the atmosphere.
Subsequently, to supplement the convention, the Kyoto Protocol came into force in
February 2005, which sets limits to the maximum amount of emission of GHGs by the
countries.

A. Need For the Study:

The need of the carbon credit is to bring about the awareness in the concept of Carbon
Credit. The concept of carbon credits came into existence for increasing awareness of the
need of controlling emission of greenhouse gases. Drastic changes in the climate threats to
the very existence of human life, changes in the wildlife habitat, stress on the natural
resources and vanishing of the resources etc. are few of the effects of the increase in the
greenhouse gases. So this entire study will bring impact on the minds of individual and
whole that how to conserve our environment by the carbon emission.

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 B. LITERATURE REVIEW

Shri Pandurang SSK earns carbon credits

June 24, 2012 | Jayashree Bhosale, ET Bureau

PUNE: The Shri Pandurang Sahakari Sakkar Karkhana (SSK) from Solapur has earned carbon
credits (certified emission reduction – CER) worth Rs. 4 crore. The sugar mills earned the
carbon credits for generating baggase-based electricity. Shri Pandurang SSK was the first co-
operative mill in the country to register with the United Nations to trade carbon credits in
2006. This is the second time; it has earned carbon credits for the renewable energy
generated from baggase.

RPOWER GAINS OVER 6% AS SOLAR PROJECT GETS CARBON CREDITS NOD

July 9, | PTI

MUMBAI: Shares of Reliance Power soared by over 6 percent after the company’s 100-MW
solar power project in Rajasthan received approval for carbon credits under United Nations
Framework Convention on Climate change. After surging nearly 8 percent to Rs. 77 in intra-
day trade, the stock finally ended at Rs 75.65, up 6.10 percent from its previous close on the
BSE. At the NSE, the scrip settled 6.1 percent higher at Rs. 75.65.

IN A FIRST, JAPAN TO STUDY CARBON EMISSION REDUCTION IN WDFC

Feb 15, 2013 | PTI

NEW DELHI: Japan has launched a study of carbon emission reduction in the Western
Dedicated Freight Corridor to facilitate the Railways to earn carbon credits in the world
market, the first such initiative globally. The objective is to work out a methodology for
monitoring; reporting and verification of carbon emission reduction as at present no such
methodologies are available for rail transport anywhere in the world, said a senior DFCC
official.

RELAINCE POWER’S 100-MW SOLAR PROJECT GETS NOD FOR CARBON

CREDITS
July 9, 2013 |PTI

NEW DELHI: Reliance power said its 100-MW solar power project in Rajasthan has received
approval for carbon credit under the UNFCC. “This is the world’s largest Concentrated Solar
Power (CSP) project ever registered with the clean Development Mechanism Executive
Board.

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 C. OBJECTIVE

The basic objective of the study is to find out the effects of carbon released in our
environment and how are the countries playing a vital role in it. The whole agenda of this
carbon credit concept is to mitigate global warming by making the environment free of toxic
gases like carbon. So the entire process involves about the trading and accounting system in
the form of carbon credit. It also states about the policy adopted by the government i.e.
polluter pays. This project also emphasizes in detail about the comparison among different
countries and its carbon emission

D. RESEARCH METHODOLOGY

Area of the study:

The area of the project which has been taken up is of the environmental concern. There has
been a comparison among the different sectors of our country and along with that among
the different countries. This has been done to find out the participation of India and the rest
of the countries in safeguarding our environment from depletion.

Sample:
Sample has been drawn from the economies and companies which are member of United
Nations Framework Convention on climate Change. Due consideration was given to cover
companies and economy of all categories.

Type of study:
All the data which have been collected is from a secondary source which includes
organizational records and data collected through qualitative methodologies or qualitative
research. There has been no involvement of the primary source as no direct questionnaires
or firsthand sources have been gathered.

Tools for data collection:

Flexible reporting tools are used like the customizable charts and tables and graphs. Few
schematic diagrams have been used as well to give a better understanding if the text.
Analytical research methodologies have been applied in the project to derive environmental
growth pattern in the different sectors as well as countries to measure its impact. Based on
the analysis from existing facts suggestion and findings of the study have been drawn in the
later part of the project.

E. LIMITATION

The concept of Carbon credit, trading and regulatory mechanism are in very infant stage in
the world and particularly in our developing country. Even after being a very important
concept the same is overlooked due to presence of many other important factors. Some of
them are as follows:

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  Broad Scope and Coverage: This subject “Carbon Credit” involves study of various
subjects like CDM, CER, Kyoto protocol and other related issues. Due to the wide
Scope of the subject it was not possible to cover all issues. Efforts were made to
cover important areas for understanding of the project.

 Time Constraint: As the area of Project was very wide, it required time for a
complete understanding & preparation. Efforts were made to cover all important
area explaining the project irrespective of time constraints.

F. CHAPTER PLANNING

This Project on carbon credit has been basically segregated into four parts.

CHAPTER 1- INTRODUCTION

This Chapter deals with the need for the study of the project, background of the topic
relating to emergence of the subject, objective and research methodology used in
preparation of data and findings.

CHATER 2- CONCEPTUAL FRAMEWORK

This part of the project origination of carbon credit, its definition and types of carbon credit.
Efforts have been mad e to cover the important concept like Kyoto protocol, certified
emission Reductions, Clean development mechanism. A brief introduction to the process of
carbon trading along with the domestic and global scenario is included to facilitate a better
understanding of the subject.

CHAPTER 3 – DATA ANALYSIS AND FINDINGS

Data & figures related to various clean development mechanism have been collected.
Special attention was given to state wise, sector wise and company wise data available for
clean development mechanism. Even the analysis for CER issued to various states in country
has been analyzed. This analysis helped to get an overview of carbon trading.

CHAPTER 4- CONCLUSION AND RECOMMENDATION

The project finally outlines action which shall be taken by economies and companies to
minimize the effect of carbon emission and dealing in carbon credit so that a balance can be
achieved. What is now required is a detailed study of companies along with development
and strengthen of a regulatory authority.

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 CHAPTER - 2
CONCEPTUAL FRAMEWORK
CARBON CREDIT:

Carbon credits are a key component of national and international emissions trading
schemes that have been implemented to mitigate global warming. They can provide an
incentive to reduce GHG effect emissions on an industrial scale by capping total annual
emissions and letting the market assign a monetary value to any shortfall through trading.

Under such activities, the environmental regulator first determines the total acceptable
emissions and then divides this total into tradable units (mentioned in the project as ‘credit’
or ‘permit’) i.e. how much one can emit. This division is done on the basis of countries
and/or industries.

Traditionally, Emission trading scheme was first developed in the 1960s and 1970s in the
United States, motivated partly by the dissatisfaction with the cost of the regulatory
approaches to pollution control; such regulations made it difficult for industries to work,
then actually the mechanism of trading of emission started.

To understand the concept of carbon credit, let’s look at various parts of carbon credit
trading.

In 1992, several countries came together to create United Nations Framework Convention
on Climate Change (UNFCCC), an international treaty that compels countries to work
together to limit emissions of greenhouse gases which cause an increase in global
temperature and climate change, and to deal with the resulting impacts.

In 1995, UNFCCC adopted the Kyoto Protocol – legally binding emission

reduction mechanisms for a specific period – to be respected by developed countries. The
period of first commitment ran from 2008 to 2012. The duration of second period began on
1 January 2013 and will end in 2020.

Participating countries are called Parties. There are 195 Parties in the UNFCCC. And there
are 191 Parties that ratified the Kyoto Protocol.

Organizations in these countries can engage in various environment-friendly activities or

‘methodologies’ – voluntary or non-voluntary – to reduce current or future emissions of
greenhouse gases. The non-voluntary or compliance-based market refers to
trading mechanisms (explained below) established under the Kyoto Protocol. Some

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countries have their own markets like the Acid Rain Program (U.S.) and Clean Energy
Regulator (Australia) have their own regional markets as well. European Union emissions
trading schemes is the largest emission trading scheme in operation.

The voluntary market is more to do with personal or Corporate Social Responsibility (CSR)
goals.

KYOTO PROTOCOL

The Kyoto protocol has created a mechanism under which more than 189 countries have
agreed to reduce green house gas emissions globally. There are 41 countries which have
taken part in this Kyoto Protocol. These countries are also called Annex I countries. India
being a developing country the emission commitment was not set as the limit cannot be
sustained for the development. Most of world’s industrialized nations support the Kyoto
Protocol. One notable exception is the United States of America, which releases more GHGs
than any other nation and accounts for more than 25% of those generated by human beings
worldwide.

Types of Greenhouse Gases which cause the Warming:

Sl. No. Greenhouse Gas Global Warming Potential (GWP)

1. Carbon Dioxide 1
2. Methane 21
3. Nitrous Oxide 310
4. Hydrofloro Carbons 140-1170
5. Perfluoro Carbons 6500-9200
6. Sulphur Hexafluoride 23900

The Kyoto Protocol’s mechanism has been diagrammatically shown below:

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 CARBON CREDITS

What are Carbon Credits?

It’s like a license to create nuisance.

You have this credit and then you can offset the damaging carbon emissions. A carbon credit
(often called a carbon offset) is a financial instrument that represents a ton of CO 2 (carbon
dioxide) or CO2e (carbon dioxide equivalent gases) removed or reduced from the
atmosphere from an emission reduction project, which can be used, by governments,
industry or private individuals to offset damaging carbon emissions that they are generating.

Where from do these originate?

Carbon Credits originate from activities known as ‘methodologies’. Methodologies such as

afforestation and reforestation activities are a key means by which existing emissions can be
removed from the atmosphere and carbon credits created while construction of a wind farm
rather than a coal-fired power station may create carbon credits through reducing future
emissions.

Carbon credits originated through these emission reduction activities can be created under
a variety of voluntary and compliance market mechanisms, schemes and standards. Some of
these instruments have been established so countries can comply with their mandatory
Kyoto targets and others provide avenues for voluntary offsetting purposes.

The first of this Carbon Credit was issued in October 2005. The market price of one carbon
credit (i.e. one tonne of carbon dioxide) today is about Rs 400. A couple of years ago it was
approx Rs. 1600.

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Carbon Emission as forecasted till 2025:

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In order to enforce this emission limit the notion of Carbon Credit was brought into the

picture. According to which Carbon Credit stands for as follows:

1 Carbon Credit = License / Permit 1 Metric Tonne of CO2 (Carbon)

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Thus if you hold 5 Carbon Credits you can emit 5 MT of Carbon into the atmosphere in a
year. These Carbon Emission limits have been set by UNFCCC and these are issued by them
in demat form i.e. in the type of shares and stock and can be traded like shares are in stock
exchange.

TYPES OF CARBON CREDIT

There are three types of Carbon Credits (as assigned by Kyoto Protocol):

1. Assigned Amount Units (AAU): According all the Kyoto Protocol all the 41
mentioned in the Annex I of Kyoto Protocol are allotted a fixed amount of carbon
credit in Demat Form. The companies cannot emit more than the credit specified in
the demat form.
2. Emission Reduction Unit (ERU): Apart from the normal AAUs’ that is allotted to them
the companies can install and set up projects which reduce carbon emission and thus
they earn carbon credits from UNFCCC. These earned units are called ERU. These are
then used by them to set off their emissions and this is called Carbon Offset.
3. Certified Emission Reduction (CER): The most interesting of them is the CERs’. This is
what involves the non participating companies in to this deal. Here the developing
countries install projects which kind of reduce the carbon emissions and thus they
earn carbon credits which are then sold to the developed countries.

Apart from the above mentioned types of credits, there are three types of certificates:
1. White Certificates: Whc or Energy Efficiency Titles (EET) – Energy savings
certificates;
2. Green Certificates: Tradable Green Certificate (TGC) scheme – Electricity produced
with renewable energy sources;
3. Black Certificates: European Union Emissions Trading Scheme (EU ETS) – CO2
emissions certificates;

CERTIFIED EMISSION REDUCTIONS (CERs)

Of all the above mentioned the most important is the CER i.e. Certified Emission Reduction.
This has been explained below separately here under:

CERs are type of emission unit issued by the CDM Executive Board for emission reductions
achieved by CDM projects and verified by a DOE under the rules of Kyoto Protocol. CERs can
be used by Annex 1 countries in order to comply with their emission limitation targets or by
operators of installations covered by the European Union Emission Trading Scheme (EU ETS)
in order to comply with their obligations to surrender EU Allowances, CERs or Emission
Reduction Units (ERUs) for the CO2 emissions of their installations. CERs can be held by
governmental and private entities on electronic accounts with the UN.

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 CERs can be purchased from
the primary market
(purchased from original
party that makes the
reduction) or secondary
market (resold from a
marketplace).

CER is issued for an

afforestation and
reforestation project
activity which expires at the
end of its crediting period.
In August 2008 price for
CERs’ were $20 a ton and
now by September 2012
price fell to $5 a ton. This
was in response to the
Eurozone debt crisis
reducing industrial activity
and the over-allocation of
emission allowances under theEuropean Union Emissions Trading Scheme.

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CARBON TRADING AND EXCHANGE

A company belonging to a developed country has two ways to reduce emissions. One, it can
reduce the GHGs by adopting new technology or improving upon the existing emission
technology to attain the new norms of the emission of gases. Second, it can tie up with
developing nations and help them set up new technology that is eco-friendly, resulting in
earning carbon credits to meet its emission reduction targets. After having done the same, it

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can either utilize it for itself or sell it out. For which I explain below two ways: Carbon
Trading and Carbon Exchange.

CARBON TRADING

Carbon Trading is a system that allows a company or country that reduces the amount of
carbon dioxide it produces to below a particular level to sell the extra reduction as a credit
to a company or country that has not reduced the amount it produces enough. In simple
words these are defined as purchase and sale of contracts;

These transactions have been divided into two main categories:

1. Allowance based transactions, and
2. Project based transactions.

Then they are sub-divided into three types of carbon trading, Cap & Trade, Baseline & Credit
and Offset. The most popularly used system of Carbon Trading is the Cap & Trade. Under the
Cap & Trade system:

 The regulator establishes an Overall limit called ‘emissions cap’.

 Allowed to emit in a given period.
 Allowances equal to all of the emissions permitted under the cap and then
distributed.

The same has been represented in the diagram below:

Process of transactions or trading

Suppose company X has funds which it can use to install a technology which would reduce
its Carbon Dioxide emission by 1,000 tons @ $2 per ton i.e. at a total cost $ 2000. And now
it can sell these 1,000 tons @ $4 per ton. Thus make a profit of $2 per ton i.e. of $ 2000.

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Now let’s talk about of company Y which has to use $ 6000 for reduction of emission of
1,000 tons. Now Y can purchase the same 1,000 tons from X @ $4 per ton (as mentioned
above). This he can save up to $ 2,000 (i.e. 6,000 – 4,000).

So, in the end both accept it with jolly.

A single transactions leads to further trailing transactions:

ADVANTAGE

This trading not only allows the developed countries to meet their emission reduction
targets but also motivates developing countries to invest more in Clean Development
Projects (CDM). Thus in turn provides a room for Sustainable Development.

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CLEAN DEVELOPMENT MECHANISM (CDM)

Clean Development Mechanism is one of the flexibility mechanisms defined in the Kyoto
Protocol that provides for emissions reduction projects which generate CER units which may
be traded in emission trading schemes.

CDM is intended to meet two objectives:

1. To assist parties not included in the Annex I in achieving sustainable development
and in contributing to the ultimate objective of UNFCCC, and
2. To assist parties included in Annex I in achieving compliance with their quantified
emission limitation and reduction commitments

CDM Process as per UNFCCC:

“The CDM allows emission-reduction projects in developing countries to earn certified

emission reduction (CER) credits, each equivalent to one tonne of CO2. These CERs can be
traded and sold, and used by industrialized countries to a meet a part of their emission
reduction targets under the Kyoto Protocol.

The mechanism stimulates sustainable development and emission reductions, while giving
industrialized countries some flexibility in how they meet their emission reduction limitation
targets.”

The below shown diagram explains the CDM Process:

Identification of Submission of the

project and PDD and host country

Development of Make PDD completely

project design available for 30 days

Host country Validation of project

approval

Verification and Submission of

Identification Validation Report

Possible review by Registration with the

CDM Executive Board CDM

Issuance of CERs to Project

project developers implementation and

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The CDM is supervised by the CDM Executive Board (CDM EB) and is under the guidance of
the Conference of the Parties of the UNFCCC. After the CDM project is ready then the host
country would have to approve the same. Cleam Development Mechanism has become a
priority such that the investements over the years have risen mainfold:

Sources : UNFCC Offical Website

CARBON EXCHANGE

Well the most important characteristic of carbon credit is its tradability. Carbon credits can
be bought and sold like any other commodity. Carbon Credit trading is channelized through
the stock exchanges. In India the Multi Commodity Exchange or MCX currently allows
trading in Carbon Credits. Futures, derivatives and option transactions are allowed in carbon
credits.

This entire process was not understood so easily. Many countries did not understand this
and those who did started developing their industries and processes which in turn lets them
save carbon credits and then they sell these to developed countries who need this.

At MCX there are future exchanges (spot and derivatives). People get price signals for the
carbon for the delivery in the next five years. Every year in the month of December the
contract expires and at the time people who have bought or sold carbon will have to take
delivery. This delivery may be done before December but generally it is avoided.

The Multi Commodity Exchange of India Ltd (MCX) entered into an alliance with the Chicago
Climate Exchange in 2005 to introduce carbon credit trading in India. MCX is the future
exchange. People here are getting price signals for the carbon for the delivery in next five
years. The exchange is only for Indians and Indian companies. The Indian government has
not fixed any norms nor has it made it compulsory to reduce carbon emissions to a certain
level. So, people who are coming to buy are actually financial investors.

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The benefits are as follows:
 Sellers and intermediaries can hedge against price risk.
 Advance selling could help project to generate liquidity and thereby reducing its
cost of implementation.
 There is no counter party risk, as exchange guarantees the trade.
 The price discovery on the exchange platform ensures the fair price for both the
sellers and buyers.

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 NATIONAL AND INTERNATIONAL SCENARIO

GLOBAL SCENARIO
The carbon markets have become the fastest growing financial market in the world.
According to many market analysts, carbon will be the world’s largest market overall. The
carbon markets are a prominent part of the response to climate change, and have been
largely driven by two specific international regulations: (i) The Kyoto Protocol and (ii) The
European Union Emissions Trading Scheme (EUETS), which is a main pillar of the EU’s effort
to meet emission reduction commitments under the Kyoto Protocol, and which allows large
emitters of carbon dioxide within Europe to trade in allowances issued by national
governments. According to Kyoto Protocol, countries with binding emission reduction
targets (which are represented by Annex- I countries) in order to meet the assigned
reduction targets are issued allowances (carbon credits) equal to the amount of emissions
allowed. An allowance or carbon credit represents one metric tonne of carbon credit
equivalent. To meet the emission reduction target, binding countries ask their local
businesses and entities to purchase carbon credits from the developing countries (non
Annex-I countries) who are not bound by the amount of GHG emissions. At present,
European Union are the major purchaser of carbon credit and Asia dominates the seller
market (see chart) led by China.

Source: State and Trends of the Carbon Market 2011, World Bank, Washington, D.C.

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INDIA’S PARTICIPATION AND PERFORMANCE
India signed and ratified the Kyoto Protocol in August 2002. India had gained from such
agreement. India not only got support financially but also technologically. India has been
improving its projects and industries making them more environments friendly and reduce
carbon emissions. India’s participation in the carbon markets has contributed to the
recognition that it is a useful tool in attracting climate friendly investments.
Several members of UNs’ Executive Board in charge of this scheme called Clean
Development Mechanism (CDM) for a review of projects, five of which are based in India.

India’s performance year wise:

1. 2002: India was an early player and it hosted the Eight Conference of parties to the
UNFCCC in Delhi
2. 2004: In the early moments of this year India’s indigenous management and
technical consultants began to offer services to potential sellers of emission
reductions. And by the end of this year India was the leader in the forward sell of
emission reductions, with 50% of the market supply.
3. 2005: China was into the market. With Kyoto Protocol and EU ETS carbon prices
started to rise and many countries found it difficult to end up on deals with them.
India dropped to third place in the global supply of project based emission
reductions behind China and Brazil.
India wants not only promotion of sustainable production processes but also sustainable
lifestyles across the Globe. It wants the developed world to fulfill its commitments for
reduction of Green House Gases, transfer new and additional financial resources and
climate friendly technology to support adaption and mitigation measures in developing
countries. With the current situation the various analysts have forecasted emission to triple
by this year.

ISSUES IN ACCOUNTING CARBON CREDITS IN INDIA

Since only CERs are relevant in the Indian context as India is not in the Annex I of Kyoto
Protocol but is a signatory to it. So only CERs’, as explained above, are applicable to Indian
scenario. Carbon credit being a nascent concept, at present there is no uniformly accepted
treatment for carbon credit. Different entities have treated carbon credit in different ways.
Some entities recognize revenue from Carbon Credit only when the carbon credit is finally
sold, that too as far as in the Profit and Loss Account. While some other industries recognize
them as intangible assets, still others treat them as government grants and account them
according to AS 1 i.e. Accounting Standard 12 – Accounting for Government Grants. Thus
these diverging treatments have aroused a principle debate which has not yet resulted with
the accounting treatment of CERs.

To solve this issue ICAI, the Institute of Chartered Accountants of India, has come out with a
Guidance Note on Accounting for self-generated CER issued on 17/02/2012. Where we have
been mentioned about:

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 Carbon credits generated under CDM, i.e., CERs can be considered as intangible
assets without a physical form as per AS-26.
 CERs are inventories of the generating entity as they are generated and held for the
purpose of sale in the ordinary course of business. Therefore, even though CERs are
intangible assets these should be accounted for as per the requirements of
“inventories” AS 2.

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 CHAPTER - 3
DATA ANALYSIS AND FINDINGS

DATA ANALYSIS:

Each CDM project has to be registered with the UNFCCC before it can get the green signal and earn
carbon credits. Below graph show the various regions that have CDM projects registered with the
UNFCCC. As you might notice that Asia, mainly the South Asia, has become the hub of CDM projects.
China and India being the big players of the game. The dark red spots denote Large scale projects
and at one location. As the red gets lighter the scale of projects also reduce.

This map is an interactive map taken from UNFCCC’s officcal site.

India has been involving itself with CDM Projects more and more. Various states have already taken
part in making a point to leave a mark in this booming sector. With more CDM projects coming up
there is a fight amongst the various states to be on the top.The same could be viewed in the graph :

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 CDM Projects in India

CDM Projects in India

Status of CDM in India and through EE (Energy Effciency) Projects:

 Over 1500 projects at various stages of the CDM process;
 Over 700 million CERs expected by end of 2013-14;
 Over 480 projects have been registered by UNFCCC;
 Energy Efficiency, as a category has the second largest number of projects in the pipline: i.e.
30%

The following graph shows the sector wise break up of various CDM projects. Where in Iron and
Steel and Power have the major hold. There are various projects that have been registered with the
UNFCCC and others many which are yet to be approved; all with the sole motive of creating enery
efficient projects and earn carbon credits.

%-age of projects
Textile
Building/Construction
Petrochemical;
Fertilizers;
Pulp &
Chemicals; %-age Textile;
of
Paper;
%-age of %-age %-age
of
of of projects;
projects;
Building/Construction;
%-age
projects; %-age1;
projects;
2% 1; Brick
Carbon Black; %-age of
2; 1%
projects;
1; 2;1% 1% 4; 4%
of projects;
2% Brick; %-age ofCarbon
projects; 2; 2%
projects; 1; 1%
Black
Oil & Gas; %-age of
projects; 11; 11% Others
Others ; %-age of
projects;
Iron and6; Steel
6%
Cement
Power
Power; %-age of projects; Oil & Gas
18; 18%
Chemicals
Pulp & Paper
Iron Fertilizers
and Steel; %-age of
projects; 41; 41%
Petrochemical
Cement ; %-age of
projects; 10; 10%

Sources : UNFCC Offical Website

Recently Gujrat came up with its present status of CDM projects. After China, India is leading country
in CERs earning. And in India its Gurjat that has hit the target, Gujrat accounts for 42% of Indian
projects that have been registered with UNFCCC. The following table shows the total CERs’ issued by
top five Indian states:

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 CERs' issued till 2011

CERs' issued till 2011

Sources : UNFCC Offical Website

INDIAN COMPANIES ON CARBON TRADING

Indian companies like SRF, Gujrat Fluro Chemicals are India’s top earners of United Nations
Carbon Credit. The top five companies with CER Emissions:
Report issued By United Nations – CO2 emission Reeduction

Estimated Emission Reduction in MT of

CO2
Rashtriya Chemicals and Fertil- SRF; Estimated
izers; Estimated Emission Reduc- Emission Reduction
tion in MT of CO2; 901968; 7% SRF in MT of CO2;
Navin Flourine In- 3833566;
Torrent Power 28%
ternational; Esti- Gujrat Fluro Chemicals
mated Emission Re-
duction in MT of Navin Flourine International
CO2; 2802150; 20% Rashtriya Chemicals and Fertil-
izers

Gujrat Fluro Chemi- Torrent Power; Es-

cals; Estimated timated Emission
Emission Reduction Reduction in MT of
in MT of CO2; CO2; 3189704; 23%
3000000; 22%

CASE 1: SRF Tyres

SRF factory in north-western Rajasthan state gets credits for burning and destroying HFC-23,
a by-product and potent greenhouse gas that was previously released into the air. HFC-23
can trap 11,700 times more heat per molecule than carbon dioxide and linger in the
atmosphere for as long as 260 years, according to the U.S. Environmental Protection
Agency.

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The UN is set to award SRF as many as 16 million Certified Emission Reductions on top of the
16.5 million received since January 2006, according to data compiled by Bloomberg. That’s
more than any other Indian project to 2012.

SRF sold 3.48 billion rupees ($74 million) of carbon credits compared with the group’s pre-
tax income of 2.46 billion rupees, according to the company’s annual report for the year
ending March 31, 2009, the most recent available.

CASE 2: GREENPLY INDUSTRIES LTD.

Green ply Industries Limited (GIL) is India’s largest interior infrastructure company with a
turnover of Rs 1420 Crores. It is the first in the Indian industry and the only laminate
manufacturer to get carbon credits under UNFCCC. From the extracts of the P/L A/C for the
year ended 31.3.2009, following information is found:

The following chart shows the income of Green ply for the year ended 2009.
Source: Green Ply Industries Limited (Annual Report 2008-09)

Greenply Ltd. (Income in 2009)

Prior period Income; Miscellaneous Income; Interest subsidy received

Series1; 0.35; 0% Series1; 29.4; 14%
Income from Carbon Cred-
Liabilities no longer re- its
quired written back; Dividend on Long Term
Series1; 10.65; 5% Investments
Insurance Claim Received
Liabilities no longer
required written back
Insurance Claim Re- Income
Prior from
period Carbon
Income
ceived; Series1; 48.84; Credits; Series1; 126.53;
Miscellaneous
59%Income
23%
Dividend on Long Term
Investments; Series1;
0.12; 0%

Key Facts:
 The Company earned Rs 126.53 Lacks by the sale of Carbon Credits.
 The Company was eligible for 17,475 CER's for their Behror unit.
 The share prices of Green ply Industries jumped by 7.5% to Rs 102.05 after the
Company said it had signed a deal to sell Carbon Credits worth $5 million.
 The deal would add 5 lakh Euros annually to its revenues between FY 2007-2012.
 The Company would also be submitting an application to UNFCCC for Carbon Credits
in respect of its MDF unit at Uttrakhand.
Thus we can see that Income by way of sale of Carbon Credit is beneficial to Green ply
Industries and the Income is credited to the Profit and Loss Account.

CASE 3: ADANI POWER LTD.

Adani Power Ltd. A unit of Adani Enterprises Ltd. Said phase III of its 4,620 MW power plant

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in Mundra, Gujarat has received carbon credits under the Clean Development Mechanism of
UNFCCC.

The achievement makes Mundra the world’s first coal fired power plant to have received
carbon credits. The company aims to earn Rs. 600 crores by trading these carbon credits in
the first 10 years. The plain is expected to generate about 1.8 million CER each year.

Rajesh Adani, managing director of Adani Power, said “While the reduced combustion of
fossil fuels will help conserve precious natural resources, the carbon credit issuance to our
project will also encourage other entities to implement similar projects to reduce their own
carbon footprint. Additionally, we are confident of expanding our generation capacity to
nearly 10,000MW by March 2013.”

FINDINGS:
The overall data collection, analysis, Interpretation and discussion gave an
insight into the concept of “Carbon Credit”.

On the basis of available data, it was found that European countries are the
major purchaser of Caron credit whereas Asia being the largest seller leads by
China and India.

The investment in CDM project has also increased over the period of time.
Almost an investment equal to 71703 Crores has already been made and is
expected to increase further.

Even there are lot of CDM projects coming up in the various states of the
country like Madhya Pradesh, Andhra Pradesh, Sikkim and other parts of
country. From the expansion and relative importance given by Indian
corporate we can say that there has been rapid expansion of CDM project in
India. Iron & Steel and power are the main sector which has involved in the
CDM project covering almost 59% of total CDM projects.

A lot has been achieved in the area of Carbon credit. But still the best is yet to
come. What is interesting to know is the active participation form Indian
Corporate.

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Page 29 of 34
 CHAPTER – 4
RECOMMENDATION

Carbon markets set up under climate-change agreements are supposed to

reduce emissions of carbon dioxide. Credits are issued that correspond in some
way to the desired carbon emissions (details vary). Companies that produce a
lot of greenhouse emissions can then purchase credits from companies that
produce fewer. Supposedly, this will fund new clean companies and projects
that lead to a decrease in carbon emissions.

Here’s the problem. Some of those new companies and projects would have
been undertaken anyway, without the credits. In that case, the credits won’t
actually lead to less emission.
For a carbon-credit system to work, it seems that we’ve got to have a
competent regulatory body that can give credits only to companies and
projects that need the credits to succeed. But this requires a detailed
understanding of industries and economies all over the world, as well as new
technologies. According to the Journal article, it’s taken years for a UN
regulatory body to figure out that it was issuing credits to projects that didn’t
need them. Overall, this sounds like an inefficient system.

A carbon dioxide tax, which assigns a cost directly to the thing that’s supposed
to be regulated, would work better. Make carbon dioxide emissions expensive,
and then let the market work out the best way to deal with those costs.

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 CONCLUSION
Though Carbon Credit is a boom in the market but ultimately it is the
environment which has to face the GHG. We in this monetary world are just
concerned about profits and savings, but we have to make sure that our
environment should not be safeguarded. At one point we are setting up plants
to reduce emissions and then on the other hand stopping the others to do the
same by giving them the lucrative offer of purchase at a lower cost as
compared to the set up costs. But ultimately the environment is at a loss. The
constantly increasing emissions of GHGs have to be curbed. Technology has to
go hand in hand with businesses and make a point not to pollute the
environment. UNFCCC has to come up with stricter norms and collaborate
amongst the countries to make use of each other’s resources. Why not give
out credit on use of harmless resources?

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ANNEXURE - IA

SUPERVISOR’S CERTIFICATE

This is to certify that Ms. Shweta Agarwal a student of B. Com (Honors in

Accounting and Finance) of The Bhawanipur Education Society College
under the University of Calcutta has worked under my supervision and
guidance for her project work and prepared a Project Report with its title
Carbon Credit: Environment at Stake.

This project report is genuine and original work of her, to the best of my
knowledge.

Place: Kolkata
Sign:___________________

Date: Name: Ms. Joyeta Bhadury

Designation: Lecturer
College: The Bhawanipur Education
Society College

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ANNEXURE - IB

STUDENT’S DECLARATION

I hereby declare that the project work with the title CARBON CREDIT:
Environment at Stake submitted by me for the partial fulfillment of the B.
Com (H) degree under the University of Calcutta is my original work and
has not been submitted to any other University / Instructions for the
fulfillment of the requirement for any course of study.
I also declare that no chapter of this manuscript in whole or part has been
incorporated in this report from any earlier work done by others or by me.
However, extracts of any literature which has been used for this report has
been duly acknowledgement providing details of such literature in this
reference.

Place: Kolkata
Sign:___________________

Date: Name: Shweta Agarwal

Roll No: 1655

Address: B/B 10/3/1
Rabindrapally, Rajarhat Main Road.
Kolkata-59
C.U. Registration No: 017-1221-
0472-11

Page 33 of 34
 REFERENCES
1. www.google.com
2. www.wikipedia.com
3. http://en.wikipedia.org/wiki/List_of_parties_to_the_Kyoto_Protocol
4. Guidance note on accounting for Self-generated Certified Emission Reductions
(CERs), issued by ICAI on 17/02/2012, page no.4 (Preface).
5. Newsletter issued by National Solid Waste Association of India (seventh issue),
February 2007, page no.2 (www.nswai.com)
6. Background Paper on Scaling up Carbon Finance in India: Strategies for Low Carbon
growth-prepared by the World Bank, June 2008, page no.iii.
7. http://www.onlinecarbonfinance.com/india-and-carbon-credits.htm
8. www.unfccc.int
9. http://cdm.unfccc.int/about/index.html
10. http://www.mcxindia.com/Uploads/Products/242/
English_Carbon_Credit_CER.pdf
11. http://www.tcs.com/SiteCollectionDocuments/White%20Papers/
BFS_whitepaper_Carbon-Credits-Trading-Young-and-Emerging-
Market_02_2010.pdf
12. http://www.dnaindia.com/mumbai/report_carbon-credit-fraud-how-big-firms-
faked-green-to-mint-gold_1738940

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