BUILDING SCIENCE & SERVICES
CARBON TRADING
IN INDIA
SUBMITTED BY:-
ASIM BIKASH MANDAL NAVEEN JOSE A.S.N SASHANK SUMAN SAURAV
CARBON TRADING ARRIVES IN INDIA
•Well, what is Carbon Trading? Let’s rewind to the Kyoto
Protocol of 1997 by which all countries are required to
reduce their greenhouse gas emissions by 5% --from
1990 levels-- in the next ten years, ie 2012—or pay a
price to those that do.
•The idea was to make developed countries pay for their
wild ways with emissions while at the same time
monetarily rewarding countries with good behaviour in
this regard.
•Since developing countries can start with clean
technologies, they will be rewarded by those stuck with
‘dirty’ ones.
•Say a company in India can
prove it has prevented the
emission of x-tonnes of carbon,
it can sell this good carbon-
karma to a company in say, the
US which has a bad karma.
•The scheme has been entitled
Clean Development Mechanism
[CDM] in 2000. Or more
commonly, Carbon Trading.
Call for Global Action:
In response to the scientific findings that the
earth is getting warmer and may lead to irreversible
adverse impacts, the United Nations Framework
Convention on Climate Change (UNFCCC) was adopted
on May 9, 1992 at the United Nations Headquarters in
New York.
Commitments of Parties
Annex 1 Country Parties
Developed countries and countries whose
economies are in transition
Adopt policies and measures to limit their
anthropogenic emissions of GHGs and
protect/enhance their GHG sinks and reservoirs to
demonstrate that they are taking the lead in
modifying longer-term trends.
• Submit their national communications on
regular basis with the following information:
? Projected anthropogenic GHG emissions by
sources and sinks with the aim of returning them
to 1990 levels, individually or jointly
? Policies and measures to limit GHG emissions and
protect/enhance sinks and reservoirs
Annex II Country Parties
Under Article 4.2 of the UNFCCC, developed country
parties included in Annex II (Annex 1 countries minus
the economies in transition) have the following
additional commitments:
• Provide new and additional financial resources to
meet the agreed full costs incurred by developing
country Parties in complying with their obligations
under Article 12.
• Provide financial resources, including transfer of
technology to meet the agreed full incremental costs
of measures to be undertaken by developing country
Parties under Article 4.
• Promote, as appropriate, the transfer of, or,
facilitate and finance access to, environmentally
sound technologies and know-how to other Parties,
particularly the developing ones to enable them to
implement the provisions of the Convention.
Non-Annex 1 Country Parties
? Non-annex 1 country Parties or developing
countries
? Have no commitments to reduce their GHG
emissions, but only to “develop, periodically
update, publish and make available to the
Conference of Parties, their national inventories of
GHG emissions by sources and removals by sinks”.
THE KYOTO PROTOCOL
The Kyoto Protocol is an international agreement
of 159 countries, which attended the 3rd Session of
the Conference of the Parties to the UNFCCC held
in December 1997 in Kyoto, Japan.
This formalized the adoption of the results of the
Berlin Mandate (CoP 1) to reduce worldwide
emissions in GHGs.
Objective of the Kyoto Protocol
The protocol was developed
to meet the ultimate objective of
the UNFCCC which is to “stabilize
GHG concentrations in the
atmosphere at a level that would
prevent anthropogenic
interference with the climate
system”, through quantified
emission targets within a
specified time frame.
Significant Provisions of the Kyoto
Protocol
Annex 1 Country Parties, individually or jointly,
ensure that their aggregate anthropogenic CO2
equivalent emissions of GHG do not exceed their
assigned amounts.
Reduction of their overall emissions by at least
5% below 1990 levels in the commitment period
2008 to 2012.
The Protocol commits Annex B countries that
ratify the Protocol to reduce GHG emissions below
1990 levels by the first commitment period (2008-
2012)
The Protocol will be legally binding when it enters
into force. It must be signed and ratified by at
least 55 countries, whose total emissions
represent 55% of the emissions of the Annex I
countries in 1990.
Incorporation by Annex 1 Parties in its annual
inventory of anthropogenic emissions the sources
and removals by sinks of GHG gases.
Expert review process, providing a thorough and
comprehensive technical assessment of the
implementation of this protocol.
No introduction of new commitments for Parties
not included in Annex 1.
The Kyoto Protocol reinforces the
principle of “common but
differentiated responsibilities”.
THE KYOTO PROTOCOL FLEXIBILITY
MECHANISMS
EMISSIONS TRADING
JOINT IMPLEMENTATION
CLEAN DEVELOPMENT MECHANISM
Emissions Trading (ET)
Article 17
- Permits countries to transfer parts
of their “allowed emissions” (assigned
amount units)
Joint Implementation (JI)
Article 6
- Allows countries to claim credit for
emission reductions that arise from
investment in other industrialized
countries, which result in a transfer of
equivalent “emission reduction units”
between the countries.
Clean Development Mechanism
(CDM)
Article 12 KP
Allows emission reduction projects that assist
in creating sustainable development in developing
countries to generate “certified emission
reductions” (CERs) for use by the investor.
Greenhouse Gases
covered by the Kyoto Protocol
Carbon dioxide (CO2)
Methane (CH4)
Nitrous Oxide (N2O)
Hydrofluorocarbons (HFCs)
Perflourocarbons (PFCs)
Sulphur hexafluoride (SF6)
ANNEX B
ANNEX 1 Party Quantified Emission
Limitation or Reduction
Commitment (fr. Base
year or period)
Australia 108
European
Community 92
Japan 94
Netherlands 92
Russian Federation 92
USA 93
THE CLEAN DEVELOPMENT
MECHANISM
(CDM)
Art. 12 KP
Objectives of the CDM
• Assists non-Annex 1 countries in achieving their
sustainable development objectives
• Enables Annex 1 parties in achieving compliance
with their quantified emissions limitation and
reduction commitments (QELRC)
• Investors benefit by obtaining GHG emission
reduction credits
Objectives of the CDM
• Host countries benefit in the form of investment,
access to better technology, and local sustainable
development
• Contribute to the ultimate objective of the
Framework Convention on Climate Change
• Developing countries will benefit from the project
activities resulting in certified emission reductions
(CERS) and developed countries will benefit by using
the CERs to meet their commitments.
Principal Requirements for CDM
Projects
Only Parties to the Protocol could participate;
Participation is voluntary and approved by each
Party;
National CDM authority to be set up;
Non-Annex I Parties (host country) must benefit
from project activities resulting in certified emission
reductions (CERs);
Principal Requirements for CDM
Projects
Projects must assist host countries in achieving
sustainable development and contributing to the
ultimate objective of the Convention;
Projects must result in real, measurable and long-
term benefits related to the mitigation of climate
change;
Projects must result in reductions in emissions that
are additional to any that would occur in the
absence of the certified project activity.
Principal Requirements for CDM
Projects
The COP/MOP shall elaborate modalities and
procedures that ensure transparency. Efficiency and
accountability through independent auditing by
operating entities and verification of project activities;
A share of proceeds from the CERs will be collected from
the CERs issued to meet the administrative costs of the
secretariat maintaing CDM activities as well as
adaptation fund set up to assist developing countries
that are seriously affected by climate change.
Principal Requirements for CDM
Projects
Projects formally initiated under the Activities
Implemented Jointly are eligible to be converted
into CDM effectively from January 2000 if they meet
the criteria.
Host Country Approval
Eligibility Criteria
Purpose
The purpose of the clean development mechanism
(CDM) is defined in Article 12 of the Kyoto Protocol to the
United Nations Framework Convention on Climate Change.
The CDM has a two-fold purpose: (a) to assist developing
country Parties in achieving sustainable development,
thereby contributing to the ultimate objective of the
Convention, and (b) to assist developed country Parties in
achieving compliance with part of their quantified emission
limitation and reduction commitments under Article 3.
Eligibility
The project proposal should establish the following
in order to qualify for consideration as CDM project
activity:
Additionalities:
• Emission Additionality: The project should lead to real,
measurable and long term GHG mitigation. The
additional GHG reductions are to be calculated with
reference to a baseline.
• Financial Additionality: The procurement of Certified
Emission Reduction (CERs) should not be from Official
Development Assistance (ODA).
Sustainable Development Indicators
It is the prerogative of the host Party to confirm whether a
clean development mechanism project activity assists it in achieving
sustainable development. The CDM projects should also be
oriented towards improving the quality of life of the poor from the
environmental standpoint.
Following aspects should be considered while designing
CDM project activity:
1.Social well being:
The CDM project activity should lead to alleviation of poverty
by generating additional employment, removal of social disparities
and contribution to provision of basic amenities to people leading
to improvement in quality of life of people.
2. Economic well being:
The CDM project activity should bring in additional
investment consistent with the needs of the people.
3. Environmental well being:
This should include a discussion of impact of the project
activity on resource sustainability and resource degradation, if
any, due to proposed activity; bio-diversity friendliness; impact
on human health; reduction of levels of pollution in general;
4. Technological well being:
The CDM project activity should lead to transfer of
environmentally safe and sound technologies that are
comparable to best practices in order to assist in upgradation
of the technological base. The transfer of technology can be
within the country as well from other developing countries
also.
National CDMA Authority
• The Seventh Conference of Parties (COP-7) to the UNFCCC
decided that Parties participating in CDM should designate a
National Authority for the CDM.
•As per the CDM project cycle, a project proposal should include
written approval of voluntary participation from the Designated
National Authority of each country and confirmation that the
project activity assists the host country in achieving sustainable
development.
•Accordingly the Central Government constituted the National
Clean Development Mechanism (CDM) Authority for the purpose
of protecting and improving the quality of environment in terms
of the Kyoto Protocol.
The composition of the "National Clean Development Mechanism
(CDM) Authority" is as follows:
1. Secretary (Environment and Forests) Chairperson
2. Foreign Secretary or his nominee Member
3. Finance Secretary or his nominee Member
4. Secretary, Industrial Policy and Promotion or his nominee Member
5. Secretary, Ministry of Non Conventional Energy Sources or his nominee Member
6. Secretary, Ministry of Power or his nominee Member
7. Secretary, Planning Commission or his nominee Member
8. Joint Secretary (Climate Change), Ministry of Environment and Forests Member
9. Director (Climate Change), Ministry of Environment and Forests Member-
Secretary
EVALUATION PROCEDURE
•CDM Authority receives projects for evaluation and approval as per the guidelines and
general criteria laid down in the relevant rules and modalities pertaining to CDM in
addition to the guidelines issued by the Clean Development Mechanism Executive
Board and Conference of Parties serving as Meeting of Parties to the United Nations
Framework Convention on Climate Change.
•The evaluation process of CDM projects includes an assessment of the probability of
eventual successful implementation of CDM projects and evaluation of extent to which
projects meet the sustainable development objectives, as it would seek to prioritize
projects in accordance with national priorities.
•CDM Authority can recommend certain additional requirements to ensure that the
project proposals meet the national sustainable development priorities and comply
with the legal framework so as to ensure that the projects are compatible with the
local priorities and stakeholders have been duly consulted.
•The Authority ensures that in the event of project proposals competing for same
source of investment, projects with higher sustainable development benefits and which
are likely to succeed are accorded higher priority.
• The Authority also carries out the financial review of project proposals to ensure
that the project proposals do not involve diversion of official development
assistance in accordance with modalities and procedures for Clean Development
Mechanism and also ensure that the market environment of the CDM project is
not conducive to under-valuation of Certified Emission Reduction (CERs)
particularly for externally aided projects.
• The Authority carries out activities to ensure that the project developers have
reliable information relating to all aspects of Clean Development Mechanism
which include creating databases on organizations designated for carrying out
activities like validation of CDM project proposals and monitoring and verification
of project activities, and to collect, compile and publish technical and statistical
data relating to CDM initiatives in India.
• The Member-Secretary of the National Clean Development Mechanism (CDM)
Authority is responsible for day-to-day activities of the Authority including
constituting committees or sub-groups to coordinate and examine the proposals
or to get detailed examination of the project proposals.
Carbon Funds & Facilities
The World Bank Carbon Finance Unit (CFU) uses money
contributed by governments and companies in OECD countries
to purchase project-based greenhouse gas emission reductions in
developing countries and countries with economies in transition.
The emission reductions are purchased through one of the CFU's
carbon funds on behalf of the contributor, and within the
framework of the Kyoto Protocol's Clean Development
Mechanism (CDM) or Joint Implementation (JI).
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