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    Carbon: Hot Business Opportunity IN

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    Chandan Gupta
    Carbon credits are part of an international plan to reduce greenhouse gas emissions and global warming. Companies have emission caps, and if they emit less than their cap they can trade excess allowances as carbon credits. India stands to benefit significantly from carbon trading through the Clean Development Mechanism by capturing a share of the growing carbon credit market, estimated to be worth $100 billion by 2012, and some Indian companies have already had carbon offset projects approved.

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    Carbon: Hot Business Opportunity IN

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    Chandan Gupta
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    Carbon credits are part of an international plan to reduce greenhouse gas emissions and global warming. Companies have emission caps, and if they emit less than their cap they can trade excess allowances as carbon credits. India stands to benefit significantly from carbon trading through the Clean Development Mechanism by capturing a share of the growing carbon credit market, estimated to be worth $100 billion by 2012, and some Indian companies have already had carbon offset projects approved.

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    Carbon credits are part of an international plan to reduce greenhouse gas emissions and global warming. Companies have emission caps, and if they emit less than their cap they can trade excess allowances as carbon credits. India stands to benefit significantly from carbon trading through the Clean Development Mechanism by capturing a share of the growing carbon credit market, estimated to be worth $100 billion by 2012, and some Indian companies have already had carbon offset projects approved.

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    53 views20 pages

    Carbon: Hot Business Opportunity IN

    Uploaded by

    Chandan Gupta
    Carbon credits are part of an international plan to reduce greenhouse gas emissions and global warming. Companies have emission caps, and if they emit less than their cap they can trade excess allowances as carbon credits. India stands to benefit significantly from carbon trading through the Clean Development Mechanism by capturing a share of the growing carbon credit market, estimated to be worth $100 billion by 2012, and some Indian companies have already had carbon offset projects approved.

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    CARBON CREDIT

    HOT BUSINESS OPPORTUNITY


    IN GLOBAL WARMING

    Presented by Chandan Gupta


    B.Com Hons.
    Roll No. 72
    St. Xaviers College Kolkata
    INTRODUCTION
    Carbon credits are an element used to aid in regulation of the
    amount of gases that are being released into the air. This is part of
    a larger international plan which has been created in an effort to
    reduce global warming and its effects.

    The plan works by capping the amount of total emissions that


    can be released by one company or business.

    If there is a shortfall in the amount of gases that are used, there
    is a monetary value assigned to this shortfall and it may be traded.
    These credits are often traded between businesses.

    However, they also are bought and sold in international markets


    at whatever the determined market value for them is.
    CARBON CREDITS
    KYOTO
    PROTOCOL
    The Kyoto Protocol is a legally binding
    agreement that arose out of the UNFCCC to
    tackle climate change through a reduction of

    green house gas emissions.

    Countries (those listed in Annex I) are


    legally bound to reduce man-made green
    house gases emissions by approximately
    5.2%.

     Individual countries have their own


    reduction targets outlined in Annex B of
    the Kyoto Protocol.

    It was adopted in Kyoto, Japan, on 11th


    December 1997.
    Objective Of The Kyoto Protocol:

    “Stabilisation of greenhouse gas concentrations in the


    atmosphere at a level that would prevent air pollution
    interference with the climate system”
    INDIA AND KYOTO PROTOCOL

     India signed and ratified the Protocol in August, 2002.

     Since India is exempted from the framework of the treaty, it


    is expected to gain from the protocol in terms of transfer of
    technology and related foreign investments

     India maintains that the major responsibility of curbing


    emission rests with the developed countries, which have
    accumulated emissions over a long period of time.
    CARBON
    OFFSETS
    Carbon Offset or a Carbon Offsets is a financial instrument
    aimed to offsets carbon emissions through the purchasing of
    carbon credit`s from a company or organization who invest in
    projects that help to reduce or limit the amount of CO2
    released into the atmosphere in the short and long term.
    CARBON
    FOOTPRINT
    The Carbon Footprint is a measurement of all
    greenhouse gases we individually produce and has
    units of tonnes of carbon-di-oxide equivalent. A
    carbon footprint is made up of two parts, the primary
    footprint and the secondary footprint.

     The primary footprint is a measure of our direct emissions


    of CO2 from the burnings of fossils fuels including domestics
    energy consumption and transportation (e.g. car and
    plane).We have direct control of these.

    The secondary footprint is a measure of the indirect CO2


    emissions from the whole lifecycle of products we use – those
    associated with their manufacture and eventual breakdown.
    To put it very simply – the more we buy the more emissions
    will be caused on our behalf
    CARBON TRADING
     A carbon trading system allows the development of a market
    through which carbon dioxide or carbon equivalents can be
    traded between participants, whether countries or companies.

     Each carbon credit is equal to 100 metric tons of carbon


    dioxide, which can be traded or exchanged in market.

     There are two kinds of carbon trading – Emission trading and


    trading in Project-based Credits. The two categories are put
    together as Hybrid trading System
    ADVANTAGES OF CARBON TRADING

     New cash source to companies who are able to maintain their emission
    levels well within the permissible limits.

     The overall ecological balance is preserved

     The company or country gets rewarded for applying clean technology


    in its production process.

     A much better corporate and social image which wins public approval.

     Encourages activities like tree plantings which would help reduce soil
    salinity, improve water quality and enhance biodiversity.
    CARBON
    TAX
    A Carbon tax is a tax on the
    carbon contents of fuels –
    effectively a tax on the
    carbon-di-oxide emissions
    from burning fossils fuels.
    Thus, carbon tax is shorthand
    for carbon-di-oxide tax or
    CO2 tax.
    EMISSION TRADING V/S CARBON TAXES:
    THE POLITICS-WHO LIKES WHICH POLICY &
    WHY?
    United States is the strongest proponent of emissions trading as US is
    energy inefficient and has high per capita carbon dioxide emissions
    levels.

    The European Union has been in favor of carbon taxes as the EU is


    already relatively energy efficient

    The Russian Federation & the Ukraine are major supporters of


    emissions trading

    Developing countries are extremely cautious of emissions trading, &


    view it primarily as a "loophole" that the US & Japan can use to avoid
    their domestic responsibility
    CDM MARKET
     The CDM market is like any other commodity market.
     Majority of the trading is done in the Primary market. The
    secondary market is not as expanded as the primary mainly because
    of the high volatility of the carbon prices.

    The Buyers of CERs can be broadly classified into:


    1. Compliance Buyers
    2. Carbon Funds (e.g.: Carbon Fund of World Bank)
    3. Traders

     CDM is a mechanism whereby an Annex I party may purchase


    emission reductions which arise from projects located in non
    Annex I countries. The carbon credits that are generated by a
    CDM project are termed Certified Emission Reductions (CERs),
    expressed in tonnes of CO2 equivalent
    CARBON TRADING AT MCX

    The Multi Commodity Exchange of India Ltd entered into an alliance


    with the Chicago Climate Exchange in 2005 to introduce carbon
    credit trading in India.

    MCX is the futures 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.
    CARBON TRADING AT MCX

    TRADING BENEFITS:
    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 guarantee


    the trade.

    The price discovery on the exchange platform


    ensure the fair price for both the sellers and buyers.

    Bring players to a single platform


    OUTLOOK FOR INDIA

    India is one of the exempted from this protocol as


    they are stated as developing countries, but overseas
    companies can buy carbon credits from these
    countries.

    Now companies in India can use Carbon credits to


    get liberal loans, incentives by multinationals in
    their countries and benefits like better social and
    ecological visibility.
    POSITION OF INDIA

    India is considered as the largest beneficiary, claiming about


    31 % of the total world carbon trade through CDM.

    It is expected to rake in at least Rs 22,500 crore to Rs 45,000


    crore over a period of time and Indian companies are expected to
    corner at least 10 per cent of the global market in the initial year.

    If India can capture a 10% share of the global CDM market,
    annual CER revenues to the country could range from US$ 10
    million to 300 million.
    INDIAN COMPANIES: TAKING
    ADVANTAGE
    Of the 15 projects approved by the UNFCCC so far, four are Indian. These four are:
    Gujarat Flurochemicals,

    Kalpataru Power Transmission Ltd,

    The Clarion power project in Rajasthan and

    The Dehar power project in Himachal Pradesh


    The country accounted for 283 CDM projects out of the 819 registered by the CDM
    Executive Board, the environment ministry, the World Bank and the International
    Emissions Trading Association
    CONCLUSIONS
    There is a great opportunity awaiting for India in carbon trading
    which is estimated to go up to $100 billion by 2012.

    In the new regime, the country could emerge as one of the largest
    beneficiaries accounting for 25 % of the total world carbon trade,
    says a recent World Bank report

    Analysts claim if more companies absorb clean technologies, total


    CERs with India could touch 500 million.

    There are projects range from cement, steel, biomass power, bio-
    gases co-generation and municipal solid waste to energy, municipal
    water pumping and natural gas power. The ministry has given the
    host-country clearance, the CDM projects will have to be approved
    by the executive board of the UNFCCC

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