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CARBON CREDITS- A CASE STUDY ON GFL
A PROJECT REPORT
Submitted by
REWACHANDANI SUDESH J.








SUBMITED TO

PARUL INSTITUTE OF MANAGEMENT
(PGDM Program)
P.O. Limda, Tal. Waghodia, Dist. Vadodara


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Acknowledgement
I am very much grateful and offer my heartfelt thanks to almighty, my beloved parents for
their blessings, my friends for their moral support and wishes for the successful completion
of this report.
My special thanks to my project guide- Prof. Ashish Bhatt for his exemplary guidance,
monitoring, useful suggestions & constant encouragement which helped me in completing the
project work in time.
Finally, yet importantly, I am obliged to staff members of PGDM Program for the valuable
information provided by them. I am grateful for their cooperation during the period of my
assignment.
Success of any person is always due to contribution from different group of individuals.


REWACHANDANI SUDESH




















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Declaration
I undersigned hereby declare that the research project I have carried contains all the relevant
data and the research topic submitted by me to the Parul Institute of Management (PGDM).
This is an original report and the report is prepared based on the knowledge and material
gained from the website.
This report is neither full nor in part has ever been submitted for the award of any other
degree of either this university or any other university.



REWACHANDANI SUDESH

















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ABSTRACT
Carbon credits are a key component of national and international emissions trading schemes
that have been implemented to mitigate global warming. They provide a way to reduce
greenhouse effect emissions on an industrial scale by capping total annual emissions and
letting the market assign a monetary value to any shortfall through trading. Credits can be
exchanged between businessesor bought and sold in international markets at the prevailing
market price. A 'carbon credit', sometimes referred to as an offset, is a permit to emit
aspecified amount of greenhouse gases, usually expressed in metric tonnes of carbon dioxide
equivalent (CO2e). 'Carbon credits' are named after the most prominent greenhouse gas,
carbon dioxide, but can represent other warming gases.



















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Sr. No Title Page
No.
1.
Introduction
1.1 Global Warming
1.2 Temperature changes
1.3 Factors responsible for climate changes
1.4 Effects of Global Warming
1.5 Responses to Global Warming
1.6 Kyoto-protocol
1.7 Carbon credits
1.8 Carbon trading
1.9 Cap and trade

7
7
8
10
13
14
17
17
17
2.
Objective of study 20
3.
Analysis and Interpretation
3.1 Carbon credits
3.2 Carbon trading
3.3 Clean Development Mechanism
3.4 Attainment of Carbon Emission Units
3.4.1 Case study of Gujarat Flourochemicals Limited
3.5 Carbon credit disclosure pattern

21
22
25
26
28
32
4.
Conclusion 38















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List of Tables
Table No Title Page No
Table-3.1 Steps to be followed for approval of CDM 27
Table-3.2 Share prices of GFL 32
Table-3.3 Monetary Value 34

List of Figures

Table No Title Page No
Fig-3.1 Gujarat Fluorochemicals Limited 28
Fig-3.2 Pie Chart: Contribution to Revenue 33

















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CHAPTER 1: INTRODUCTION

1.1 GLOBAL WARMING

What is Global Warming?
Global warming is the rise in the average temperature of Earth's atmosphere and oceans since
the late 19th century and its projected continuation. The Earth's average surface
temperature rose by 0.740.18 C over the period 19062005. The rate of warming over the
last half of that period was almost double that for the period as a whole (0.130.03 C per
decade, versus 0.070.02 C per decade).
The Intergovernmental Panel on Climate Change (IPCC) concludes that most of the observed
temperature increase is primarily caused by increasing concentrations of Greenhouse
Gases produced by human activities such as the burning of fossil fuels and deforestation.
Climate model projections summarized in the 2007 Fourth Assessment Report (AR4) by
the Intergovernmental Panel on Climate Change (IPCC) indicated that during the 21st century
the global surface temperature is likely to rise a further 1.1 to 2.9 C for their
lowest emissions scenario and 2.4 to 6.4 C for their highest. The ranges of these estimates
arise from the use of models with differing sensitivity to greenhouse gas concentrations.

1.2 TEMPERATURE CHANGES
Since the early 20th century, Earth's mean surface temperature has increased by about 0.8
C (1.4 F), with about two-thirds of the increase occurring since 1980.
Recent estimates by NASA's Goddard Institute for Space Studies (GISS) and the National
Climatic Data Center show that 2005 and 2010 tied for the planet's warmest year since
reliable, widespread instrumental measurements became available in the late 19th century,
exceeding 1998 by a few hundredths of a degree. Estimates by the Climatic Research
Unit (CRU) show 2005 as the second warmest year, behind 1998 with 2003 and 2010 tied for
third warmest year, however, "the error estimate for individual years is at least ten times
larger than the differences between these three years." The World Meteorological
Organization (WMO) statement on the status of the global climate in 2010 explains that, "The
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2010 nominal value of +0.53 C ranks just ahead of those of 2005 (+0.52 C) and 1998
(+0.51 C), although the differences between the three years are not statistically significant.
The thermal inertia of the oceans and slow responses of other indirect effects mean that
climate can take centuries or longer to adjust to changes in forcing. Climate
commitment studies indicate that even if greenhouse gases were stabilized at 2000 levels, a
further warming of about 0.5 C (0.9 F) would still occur.

1.3 FACTORS RESPONSIBLE FOR CLIMATE CHANGE:
External Forcing:
External forcing refers to processes external to the climate system (though not necessarily
external to Earth) that influence climate. The climate system can respond to changes
in external forcings. Examples of external forcings include changes in atmospheric
composition (e.g., increased concentrations of greenhouse gases), solar
luminosity, volcanic eruptions, and variations in Earth's orbit around the Sun. Attribution of
recent climate change focuses on the first three types of forcing. Orbital cycles vary slowly
over tens of thousands of years and thus are too gradual to have caused the temperature
changes observed in the past century.
Greenhouse Gases:
The greenhouse effect is the process by which absorption and emission of infrared radiation
by gases in the atmosphere warm a planet's lower atmosphere and surface. It was proposed
by Joseph Fourier in 1824 and was first investigated quantitatively by Svante Arrhenius in
1896.
Naturally occurring amounts of greenhouse gases have a mean warming effect of about 33
C (59 F). Important greenhouse gases are: carbon dioxide (CO
2
), methane (CH
4
), nitrous
oxide (N
2
O), hydrofluorocarbons (HFC), perfluorocarbons (PFC), and sulphur hexafluoride
(SF
6
).The contribution of these gases in green house effect could be given as: water vapour-
causing about 3670% of the greenhouse effect; carbon dioxide (CO
2
)-causing 9
26%; methane (CH
4
), causing 49%; and ozone (O
3
) causing 37%. Clouds also affect the
radiation balance through cloud forcings , but they are composed of liquid water or ice and so
are considered separately from water vapour and other gases.

Human activity since the Industrial Revolution has increased the amount of greenhouse gases
in the atmosphere, leading to increased radiative forcing from CO
2
, methane, tropospheric
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ozone, CFCs and nitrous oxide. The concentrations of CO
2
and methane have increased by
36% and 148% respectively since 1750. These levels are much higher than at any time during
the last 800,000 years, the period for which reliable data has been extracted from ice cores.
Less direct geological evidence indicates that CO
2
values higher than this were last seen
about 20 million years ago. Fossil fuel burning has produced about three-quarters of the
increase in CO
2
from human activity over the past 20 years. The rest of this increase is caused
mostly by changes in land-use, particularly deforestation.
Over the last three decades of the 20th century, gross domestic product per capita
and population growth were the main drivers of increases in greenhouse gas
emissions. CO
2
emissions are continuing to rise due to the burning of fossil fuels and land-
use change. Emissions scenarios, estimates of changes in future emission levels of
greenhouse gases, have been projected that depend upon uncertain
economic, sociological, technological, and natural developments. Accordingly, the IPCC
Special Report on Emissions Scenarios gives a wide range of future CO
2
scenarios, ranging
from 541 to 970 ppm by the year 2100(an increase by 90-250 % since 1750).Fossil fuel
reserves are sufficient to reach these levels and continue emissions past 2100 if coal, tar
sands, or methane clathrates are extensively exploited.
The popular media and the public often confuse global warming with ozone depletion, i.e.,
the destruction of stratospheric ozone by chlorofluorocarbons. Although there are a few areas
of linkage, the relationship between the two is not strong. Reduced stratospheric ozone has
had a slight cooling influence on surface temperatures, while increased tropospheric
ozone has had a somewhat larger warming effect.
Particulates and soot
Global dimming, a gradual reduction in the amount of global direct irradiance at the Earth's
surface, was observed from 1961 until at least 1990. The main cause of this dimming is
particulates produced by volcanoes and human made pollutants, which exerts a cooling effect
by increasing the reflection of incoming sunlight. The effects of the products of fossil fuel
combustion CO
2
and aerosols have largely offset one another in recent decades, so that
net warming has been due to the increase in non-CO
2
greenhouse gases such as
methane. Radiative forcing due to particulates is temporally limited due to wet
deposition which causes them to have an atmospheric lifetime of one week. Carbon dioxide
has a lifetime of a century or more, and as such, changes in particulate concentrations will
only delay climate changes due to carbon dioxide.
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In addition to their direct effect by scattering and absorbing solar radiation, particulates have
indirect effects on the radiation budget. Sulphates act as cloud condensation nuclei and thus
lead to clouds that have more and smaller cloud droplets. These clouds reflect solar radiation
more efficiently than clouds with fewer and larger droplets, known as the Twomey
effect. This effect also causes droplets to be of more uniform size, which reduces growth of
raindrops and makes the cloud more reflective to incoming sunlight, known as the Albrecht
effect. Indirect effects are most noticeable in marine stratiform clouds, and have very little
radiative effect on convective clouds. Indirect effects of particulates represent the largest
uncertainty in radiative forcing.
Solar variations:
Variations in solar output have been the cause of past climate changes. The consensus among
climate scientists is that changes in solar forcing probably had a slight cooling effect in recent
decades. This result in less certain than some others, with a few papers suggesting a warming
effect.
Greenhouse gases and solar forcing affect temperatures in different ways. While both
increased solar activity and increased greenhouse gases are expected to warm
the troposphere, an increase in solar activity should warm the stratosphere while an increase
in greenhouse gases should cool the stratosphere. Radiosonde (weather balloon) data show
the stratosphere has cooled over the period since observations began (1958), though there is
greater uncertainty in the early radiosonde record. Satellite observations, which have been
available since 1979, also show cooling.

1.4 EFFECTS OF GLOBAL WARMING:
Physical Impacts:
Working Group I's contribution to the IPCC Fourth Assessment Report, published in 2007,
concluded that warming of the climate system was "unequivocal." This was based on the
consistency of evidence across a range of observed changes, including increases in global
average air and ocean temperatures, widespread melting of snow and ice, and rising global
average sea level.
Human activities have contributed to a number of the observed changes in climate. This
contribution has principally been through the burning of fossil fuels, which has led to an
increase in the concentration of GHGs in the atmosphere. Another human influence on the
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climate are sulphur dioxide emissions, which are a precursor to the formation of sulphate
aerosols in the atmosphere.


Effects on weather
Observations show that there have been changes in weather As climate changes,
the probabilities of certain types of weather events are affected.
Changes have been observed in the amount, intensity, frequency, and type
of precipitation. Widespread increases in heavy precipitation have occurred, even in places
where total rain amounts have decreased. Authors of the IPCC Fourth Assessment
Report concluded that human influences had, led to an increase in the frequency of heavy
precipitation events. Projections of future changes in precipitation show overall increases in
the global average. Also, increased extremes of summer dryness and winter wetness are
projected for much of the globe, meaning a generally greater risk of droughts and floods.

Extreme weather
Since the late 20th century, changes have been observed in the trends of some extreme
weather and climate events, e.g., heat waves. Human activities have, with varying degrees of
confidence, contributed to some of these observed trends. Projections for the 21st century
suggest continuing changes in trends for some extreme events. Solomon et al. (2007),

for
example, projected the following likely (greater than 66% probability, based on expert
judgement) changes:
an increase in the areas affected by drought;
increased tropical cyclone activity;
And increased incidence of extreme high sea level (excluding tsunamis).
Projected changes in extreme events will have predominantly adverse impacts on ecosystems
and human society.
Glacier retreat and disappearance
Authors of the IPCC Fourth Assessment Report (AR4) found that, on average, mountain
glaciers and snow cover had decreased in both the northern and southern hemispheres. This
widespread decrease in glaciers and ice caps had contributed to observed sea level rise. With
very high or high confidence (see footnote 2), authors of the IPCC Working Group II
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Assessment (IPCC AR4 WG2 2007) and Synthesis Report (IPCC AR4 SYR 2007) made a
number of projections relating to future changes in glaciers:
Mountainous areas in Europe will face glacier retreat
In Polar regions, there will be reductions in glacier extent and the thickness of glaciers.
More than one-sixth of the world's population are supplied by melt water from major
mountain ranges. Changes in glaciers and snow cover are expected to reduce water
availability for these populations.
In Latin America, changes in precipitation patterns and the disappearance of glaciers will
significantly affect water availability for human consumption, agriculture, and energy
production.
Oceans
The role of the oceans in global warming is a complex one. The oceans serve as a sink for
carbon dioxide, taking up much that would otherwise remain in the atmosphere, but increased
levels of CO
2
have led to ocean acidification. Furthermore, as the temperature of the oceans
increases, they become less able to absorb excess CO
2
. The ocean has also acted as a sink in
absorbing extra heat from the atmosphere.

The increase in ocean heat content is much larger
than any other store of energy in the Earths heat balance over the two periods 1961 to 2003
and 1993 to 2003, and accounts for more than 90% of the possible increase in heat content of
the Earth system during these periods.
Global warming is projected to have a number of effects on the oceans. Ongoing effects
include rising sea levels due to thermal expansion and melting of glaciers and ice sheets, and
warming of the ocean surface, leading to increased temperature stratification. Other possible
effects include large-scale changes in ocean circulation.
Health
Human beings are exposed to climate change through changing weather patterns
(temperature, precipitation, sea-level rise and more frequent extreme events) and indirectly
through changes in water, air and food quality and changes in ecosystems, agriculture,
industry and settlements and the economy.
A study by the World Health Organization (WHO, 2009) estimated the effect of climate
change on human health. Climate change was estimated to have been responsible for 3%
of diarrhoea, 3% of malaria, and 3.8% of dengue fever deaths worldwide in 2004. Total
attributable mortality was about 0.2% of deaths in 2004; of these, 85% were child deaths.
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Projected impacts
The total economic impacts from climate change are highly uncertain. With medium
confidence, Smith et al.(2001)

concluded that world GDP would change by plus or minus a
few percent for a small increase in global mean temperature (up to around 2 C relative to the
1990 temperature level). Most studies assessed by Smith et al. (2001)

projected losses in
world GDP for a medium increase in global mean temperature (above 2-3 C relative to the
1990 temperature level), with increasing losses for greater temperature increases.

1.5 RESPONSES TO GLOBAL WARMING
Geoengineering
Geoengineering, the deliberate modification of the climate, has been investigated as a possible
response to global warming, e.g. by NASA and the Royal Society. Techniques under research
fall generally into the categories solar radiation management and carbon dioxide removal,
although various other schemes have been suggested. Research is at a generally early stage,
with no large-scale schemes currently deployed.

Mitigation
Reducing the amount of future climate change is called mitigation of climate change. The
IPCC defines mitigation as activities that reduce greenhouse gas (GHG) emissions, or
enhance the capacity of carbon sinks to absorb GHGs from the atmosphere. Many countries,
both developing and developed, are aiming to use cleaner, less polluting, technologies. Use of
these technologies aids mitigation and could result in substantial reductions in CO
2
emissions.
Policies include targets for emissions reductions, increased use of renewable energy, and
increased energy efficiency. Studies indicate substantial potential for future reductions in
emissions.
In order to limit warming to within the lower range described in the IPCC's "Summary
Report for Policymakers" it will be necessary to adopt policies that will limit greenhouse gas
emissions to one of several significantly different scenarios described in the full report. This
will become more and more difficult with each year of increasing volumes of emissions and
even more drastic measures will be required in later years to stabilize a desired atmospheric
concentration of greenhouse gases. Energy-related carbon-dioxide (CO
2
) emissions in 2010
were the highest in history, breaking the prior record set in 2008.
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Since even in the most optimistic scenario, fossil fuels are going to be used for years to come,
mitigation may also involve carbon capture and storage, a process that traps CO
2
produced by
factories and gas or coal power stations and then stores it, usually underground.



1.6 WHAT IS THE KYOTO PROTOCOL ON CLIMATE CHANGE?
International Regime on Greenhouse Gas Emissions
The Kyoto Protocol is an international system of governance, implemented under the United
Nations Framework Convention on Climate Change for the purpose of regulating levels of
greenhouse gases in the earths atmosphere. The Protocol was first adopted in principle at a
1997 United Nations-sponsored meeting held in Kyoto, Japan (hence, the name Kyoto
Protocol), and officially came into force in 2005, after being formally ratified by the
required number of nations. As a system of governance, the Protocol is underwritten by
national governments and is operated under the aegis of the United Nations. Participating
nations have agreed to meet certain greenhouse gas emissions targets, as well as submit to
external review and enforcement of these commitments by United Nations-based bodies.
Objectives of the Protocol: Stalling Global Warming
The objective of the Protocol is the stabilization of levels of greenhouse gases in the earths
atmosphere in order to stall global warming. Global warming has become a global concern;
the Inter governmental Panel on Climate Change (IPCC), a United Nations agency, has
predicted the earths average temperature will increase between 1.4 and 5.8 degrees Celsius
between the years 1990 and 2100, with potentially significant environmental and social
consequences. Moreover, the IPCC has linked the global warming phenomenon to human
actions, and specifically, to increased levels of greenhouse gas emissions by humans through
such activities as the burning of fossil fuels, deforestation, and industrial and agricultural
production. The Protocol is meant to serve as a framework by which participating countries
work cooperatively to stabilize concentrations of greenhouse gases in the earths atmosphere.
National Participation in the Kyoto Protocol
As of July 2006, 164 national governments, including Canada, had ratified the Kyoto
Protocol (United Nations Framework Convention on Climate Change: 10 July
2006). Ratification means that these nations have formally adopted the Protocol in their
domestic political institutions. As such, these nations are formally committed to meeting their
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specific greenhouse gas emission targets and are open to external review and enforcement by
United Nations-based bodies. There are, however, notable non-ratifying nations, in
particular, the United States and Australia. While both nations have signed the Protocol,
neither has passed the agreement in their respective national legislatures. This means that
they are neither bound by Kyoto emission target commitments, nor subject to external review
and/or enforcement of those commitments.

History of the Kyoto Protocol
The Kyoto Protocol involved a process of inter-governmental negotiations over a 13-year
period. The following provides an historical overview of these negotiations, from the original
meeting of nations in 1992, to the Protocols coming into force in 2005.

Developed & Developing Nations under the Protocol
Under the Protocol, ratifying nations (those that formally adopted the Protocol in their
domestic political institutions) are divided into basic two categories: developed nations and
developing nations. This distinction is based on economics, with developed nations
(referred to under the Protocol as Annex 1 countries) representing economies that are well
developed, such as Canada, Japan, Russia, and most European nations. Developing nations
(referred to as Non-annex 1 countries), by contrast, represent economies considered to be
underdeveloped or in the process of developing, such as China, India, and the nations of
Africa and South America.
Only Annex 1 nations have binding greenhouse gas emission targets, while Non-Annex 1
countries are currently exempt. This means that major greenhouse gas emitters, such as China
and India, are not obliged to limit their emissions and may, in fact, increase their production
of greenhouse gases without penalty. Non-annex 1 countries, however, do have an important
role to play in the Protocols flexibility mechanisms (see below); developed nations (Annex 1
countries) receive emission credits for funding greenhouse gas reduction projects in
developing nations (Non-annex 1 countries). Moreover, special funds, such as the Least
Developed Countries Fund, have been committed under the Protocol to aid developing
countries in dealing with greenhouse gas emissions and the potential impact of
global warming.
The Protocols distinction between developed and developing nations stems from an early
recognition that developed nations had been the leading contributors to increasing greenhouse
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gas levels over the last century and, as such, should take the lead in stabilizing the process of
global warming. As noted earlier, negotiating parties further agreed that developing nations
should not be required to sacrifice economic development in order to reduce or stabilize their
greenhouse gas emissions accounting for their exemption from emission targets.
Flexibility Mechanisms Under the Protocol
Another important element of the Kyoto Protocol is its flexibility mechanisms. These enable
participating nations to achieve their emission targets by means other than simply reducing
their own national emissions of greenhouse gases hence, the term flexibility mechanisms.
The Protocol provides for three such mechanisms: The economic basis for providing this
flexibility is that the marginal cost of reducing (or abating) emissions differs among
countries."Marginal cost" is the cost of abating the last tonne of CO
2
-eq for an Annex I/non-
Annex I Party. At the time of the original Kyoto targets, studies suggested that the flexibility
mechanisms could reduce the overall (aggregate) cost of meeting the targets. Studies also
showed that national losses in Annex I gross domestic product (GDP) could be reduced by
use of the flexibility mechanisms
The production of emission reductions generated by the CDM and JI can be used by Annex I
Parties in meeting their emission limitation commitments. The emission reductions produced
by the CDM and JI are both measured against a hypothetical baseline of emissions that would
have occurred in the absence of a particular emission reduction project. The emission
reductions produced by the CDM are called Certified Emission Reductions (CERs);
reductions produced by JI are called Emission Reduction Units (ERUs). The reductions are
called "credits" because they are emission reductions credited against a hypothetical baseline
of emissions
Clean Development: This mechanism allows developed (or Annex 1) nations to receive
emission credits towards their own emission targets by participating in certain projects in
developing (or Non-annex 1) countries. These Clean Development projects must be approved
by members of the Protocol and must contribute to sustainable development and greenhouse
gas emission reductions in the host developing country.
Joint Implementation: This mechanism allows Annex 1 nations to receive emission credits
towards their own emission targets by participating in certain projects with other Annex 1
nations. These Joint Implementation projects must be approved by all nations participating in
the project, and must either reduce greenhouse gas emissions or contribute to enhanced
greenhouse gas removal through emission sinks (i.e. reforestation).
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Emissions Trading: This mechanism allows Annex 1 nations to purchase emission credits
from other Annex 1 countries. Some countries will be below the emission targets assigned to
them under the Protocol and, as such, will have spare emission credits. Under the emissions
trading system, other nations may purchase these spare credits and use them towards their
own emission targets.
These mechanisms are meant to provide individual countries some flexibility in meeting their
particular emission targets, while still ensuring an overall reduction in greenhouse gas
emissions. Under the Clean Development Mechanism, for example, the Annex 1 nation
receives emission credits for reducing greenhouse gas emission in a developing nation.
Hence, while emissions in the Annex 1 nation have in actuality remained the same, overall
global emissions have been reduced
1.7 CARBON CREDIT:
A carbon credit is a generic term for any tradable certificate or permit representing the right
to emit one tonne of carbon dioxide or the mass of another greenhouse gas with a carbon
dioxide equivalent (tCO
2
e) equivalent to one tonne of carbon dioxide.
1.8 CARBON TRADING
The dramatic imagery of global warming frightens people. Melting glaciers, freak storms and
stranded polar bears -- the mascots of climate change -- show how quickly and drastically
greenhouse gas emissions (GHG) are changing our planet. Such graphic examples, combined
with the rising price of energy, drive people to want to reduce consumption and lower their
personal shares of global emissions. But behind the emotional front of climate change lays a
developing framework of economic solutions to the problem. Two major market-based
options exist, and politicians around the world have largely settled on carbon trading over
its rival, carbon tax, as the chosen method to regulate GHG emissions.
CARBON TRADING, sometimes called emissions trading, is a market-based tool to limit
GHG. Carbon Trading is characterized by selling Carbon Credits gained by reducing Carbon
emissions to a host country and getting pre-assigned reward in terms of money.

1.9 CAP-AND-TRADE:
If a country emits less greenhouse gases than the cap calls for, it receives carbon credits that
it can turn around and sell on worldwide carbon exchanges. If the country exceeds the Kyoto
caps, it must buy credits to offset its extra energy use. The price of the carbon credits is set by
the market.
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The carbon market trades emissions under cap-and-trade schemes or with credits that pay for
or offset GHG reductions. Emissions trading or cap-and-trade is a market-based approach
used to control pollution by providing economic incentives for achieving reductions in the
emissions of pollutants.
Cap-and-trade schemes are the most popular way to regulate carbon dioxide (CO
2
)
and other emissions. The scheme's governing body begins by setting a Cap on allowable
emissions. It then distributes or auctions off emissions allowances that total the cap.
Member firms that do not have enough allowances to cover their emissions must
either make reductions or buy another firm's spare credits. Members with extra
allowances can sell them or bank them for future use. Cap-and-trade schemes can be either
mandatory or voluntary.
A successful cap-and-trade scheme relies on a strict but feasible cap that decreases
emissions over time. If the cap is set too high, an excess of emissions will enter the
atmosphere and the scheme will have no effect on the environment. A high cap can
also drive down the value of allowances, causing losses in firms that have reduced their
emissions and banked credits. If the cap is set too low, allowances are scarce and
overpriced. Some cap and trade schemes have safety valves to keep the value of
allowances within a certain range. If the price of allowances gets too high, the scheme's
governing body will release additional credits to stabilize the price. The price of allowances
is usually a function of supply and demand.
Burning of fossil fuels is a major source of industrial greenhouse gas emissions, especially
for power, cement, steel, textile and fertilizer industries. The major
greenhouse gases 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. The concept of carbon credits came into
existence as a result of increasing awareness of the need for cont roll ing
emi ssi ons. It was formal ized i n t he Kyot o Prot ocol, an i nt ernat i onal agreement
between 169 countries.

According to World Bank estimates, India is expected to rake in $100 million annually by
trading in carbon credits and Indian companies are expected to corner at least 10 per cent of
the global market in the initial years.
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Globally, greenhouse gas emissions are expected to come down by 2.5 billion tones by 2012.
According to industry estimates, Indian companies are expected to generate at least
$8.5 billion at the going rate of $10 per ton of CER.
By 2007, when actual trading will start, the cost of a tone of CER was estimated to rise to
$45, said officials in the ministry of environment and forests. India is the worlds sixth largest
emitter of carbon dioxide with its present share in global emissions estimated at 6 per cent.



























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CHAPTER:2 OBJECTIVE OF STUDY

1. To depict the importance of Carbon Credits: how it helps to reduce greenhouse effect
emission on an industrial scale.
2. To know the Carbon Trading Mechanism: explaining how carbon credits can be sold
and purchased in the market.
3. To make an in depth study of Clean Development Mechanism (CDM): how it helps in
generating CER units.
4. To make a study on attainment of CER Units.
5. To evaluate the disclosure pattern adopted by the company.




















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CHAPTER:3 ANALYSIS AND INTERPRETATION

3.1 CARBON CREDITS:
Carbon credits are a key component of national and international emissions trading schemes.
They provide a way to reduce greenhouse effect emissions on an industrial scale by
capping total annual emissions and letting the market assign a monetary value to
any shortfall through tradi ng. Credi ts can be exchanged bet ween busi nesses or
bought and sol d i n int ernati onal markets at the prevailing market price. Credits can be
used to finance carbon reduction schemes between trading partners and around the world.
There are also many companies that sell carbon credits to commercial and individual
customers who are interested in lowering their carbon footprint on a voluntary basis.
These carbons off setters purchase the credits from an investment fund or a carbon
development company that has aggregated the credits from individual projects. The quality of
the credits is based in part on the validation process and sophistication of the fund or
development company that acted as the sponsor to the carbon project. This is reflected in
their price; voluntary units typically have less value than the units sold through the
rigorously-validated Clean Development Mechanism Emissions trading involve the
exchange of emissions certificates. Operators of large
energy product i on plant s or energy i nt ensive i ndust ri al compani es are
assi gned a predet ermi ned number of emissions certificates by their governments.
These initial certificates are free, and authorize the companies to emit a specific amount
of CO2. If a company exceeds its allowance, it must buy in additional certificates. When
a company reduces its emissions, it can sell its excess cert i fi cat es for profit .
Compani es face penal t i es when t hey do not acqui re enough certificates to
balance out the CO2 they have emitted. In addition to the emissions certificates
allocated by the state, companies can also make use of other f lexible mechanisms.
If they invest in emissions reduction projects in other countries, for example, they receive
additional emissions allowances, which are the equivalent of emissions certificates.
These can also be traded. The use of these market mechanisms ensures that the reductions
in emissions are made where the costs of reduction are lowest. Thus, for all companies
involved, emissions trading makes both ecological and economic sense.


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3.2 CARBON TRADING
Carbon emissions trading is a form of emissions trading that specifically targets carbon
dioxide (calculated in tonnes of carbon dioxide equivalent or tCO
2
e) and it currently
constitutes the bulk of emissions trading.
This form of permit trading is a common method countries utilize in order to meet their
obligations specified by the Kyoto Protocol; namely the reduction of carbon emissions in an
attempt to reduce (mitigate) future climate change.
Carbon Trading is characterized by selling Carbon Credits gained by reducing
Carbon emissions to a host country and getting pre-assigned reward in terms of money.
Carbon Trading also involves trading of Carbon credits to a country by another
country who earns more Carbon credits by reducing more Carbon emissions.

3.2.1 CLIMATE AND EMISSIONS TRADING
It was at t he 1997 Kyot o Eart h Summi t t hat dozens of i ndust ri al ized
count ri es commit t ed t hemsel ves t o si gni ficant l y reduci ng t hei r emi ssi ons
Of gases t hat affects cl i mat e change, particularly carbon dioxide. To achieve this
goal, they agreed to put in place several measures, among them an international emissions
trading system. Many experts believe that this trading system, first implemented in the
European Union in 2005, will be one of the most efficient instruments to Promote
international climate change protection.

3.2.2 FACTS ABOUT CLIMATE AND EMISIONS TRADING
The trade system involves the exchange of emissions certificates
(one certificate covers one ton of CO2). Trading can take place at national or
international level, or between companies. Companies receive a certain number of free
certificates from their governments. When a company reduces its emissions, it can sell
its excess certificates for profit to other companies. In contrast, a company faces penalty if it
does not acquire enough certificates.
International emissions trading as agreed in the Kyoto Protocol officially begins in 2008,
but vari ous regi onal and nat ional t rading i nit i ati ves have al ready begun. The
l argest and most comprehensive of these initiatives was started by the EU in 2005.
Some 12,000 installations across Europe with a combined trading volume of 1.2 billion tons
of CO2 are involved in the EU scheme. Many represent heavy polluting industries, such as
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energy production and building material manufacturing.The use of these market mechanisms
ensures that reductions in emissions are made where the costs of reduction are lowest.

3.2.3 HOW CARBON TRADING WORKS?
Mandatory Carbon Trading
The Kyoto Protocol, an international treaty on climate change that came into force in 2005,
dominates the mandatory carbon market. It serves as both a model and a warning for every
emerging carbon program.
Under the Protocol, members of the convention with industrialized or transitional economies
(Annex I members) receive specific reduction targets. Member states with developing
economies are not expected to meet emissions targets -- an exception that has caused
controversy because some nations like China and India produce enormous levels of GHG.
The Protocol commits Annex I members to cut their emissions 5 percent below 1990 levels
between 2008 and 2012. But because the Protocol does not manage the way in which
members reduce their emissions, several mechanisms have arisen. The largest and most
famous is the European Trading Scheme (ETS), still in its two-year trial phase.
The ETS is mandatory across the European Union (EU). The multi sector cap and trade
scheme includes about 12,000 factories and utilities in 25 countries. Each member state sets
its own emissions cap, or national allocation plan, based on its Kyoto and national targets.
Countries then distribute allowances totalling the cap to individual firms. Even though
countries distribute their own allowances, the allowances themselves can be traded across the
EU. Independent third parties verify all emissions and reductions.
There has been, however, some question as to whether the ETS has actually helped reduce
emissions. Some people even call it a "permit to pollute" because the ETS allows member
states to distribute allowances free of charge .The ETS also excludes transport, homes and
public sector emissions from regulation. And as with all cap-and-trade schemes, governments
can essentially exempt influential industries by flooding them with free allowances.
The ETS allows its members to earn credits by funding projects through two other Kyoto
mechanisms: the Clean Development Mechanism (CDM) and Joint Implementation (JI).
CDM allows Annex I industrialized countries to pay for emissions reduction projects in
poorer countries that do not have emissions targets. By funding projects, Annex I countries
earn certified emissions reduction (CER) credits to add to their own allowances. JI allows
Annex I parties to fund projects in other Annex I countries.
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The Kyoto Protocol expires in 2012. Lawmakers around the world are rushing to analyze its
achievements and shortcomings and negotiate a successor. The United States, Kyoto's most
famous holdout, lacks any national mandatory carbon legislation but, ironically, has a
booming voluntary carbon market.
Voluntary Carbon Trading:
The Clinton administration helped develop the Kyoto Protocol. But when it came time to
ratify the treaty in 2001, the United States chose not to. The government believed that Kyoto
was fatally flawed and could cause economic havoc. Not all Americans agreed, however. In
2005, 132 of the nation's mayors pledged to meet Kyoto-like emissions targets. Many cited
the economic consequences of dwindling water supplies and rising oceans.
Some cities and companies took action even earlier. In 2003, Dr. Richard Sandor founded
the Chicago Climate Exchange (CCX), a voluntary carbon market. The voluntary carbon
markets function outside of the compliance market. They enable businesses, governments,
NGOs, and individuals to offset their emissions by purchasing offsets that were created either
through the CDM or in the voluntary market. The latter are called VERs (Verified or
Voluntary Emissions Reductions). Compared to the mandatory market, trading volumes in
the voluntary market are much smaller because demand is created only by voluntary buyers
(corporations, institutions and individuals) to buy offsets whereas in a mandatory market,
demand is created by a regulatory instrument. Because there is lower demand and because
VERs cannot be used in mandatory markets, VERs tends to be cheaper than those credits sold
in the mandatory market (e.g. CERs).
Members of the CCX willingly join the pooled commodity but commit to legally binding
reductions. Since the CCX is voluntary, all sorts of organizations have joined: companies,
universities and even cities. Michigan State, Ford, DuPont and the cities
of Chicago and Portland, Ore., are among its members.
Like other cap-and-trade programs, the CCX sets a limit on total allowable emissions and
issues allowances that equal the cap. Member firms then trade the allowances -- carbon
financial instruments (CFIs) -- amongst themselves. Each CFI equals 100 metric tons of
CO2 equivalents. Members that meet their targets can sell or bank their allowances. Firms
can also generate CFIs, specifically exchange offsets, by funding approved GHG reduction
projects outside of the pool. In 2006, CCX traded a total of 10.2 million tons of CO2 .
Because CCX is owned by an independent, publicly traded company, it's free from the
federal regulations that can bog down mandatory carbon trading schemes.
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Like Kyoto or the ETS, the CCX has two phases of implementation. In the first phase, which
ran from 2003 to 2006, members committed to reducing emissions by only 1 percent per year
below their baselines. In the second phase, which will run from 2007 to 2010, members will
reduce emissions 6 percent below their baselines.
Although the CCX's high cap has drawn criticism, the pooled commodity's true benefit may
end up being the market-based practice it provides its members. Cities across the country
have already created municipal carbon schemes. Some states are fashioning mandatory
carbon markets for utilities. The United States is very likely headed toward some form of
national carbon legislation. When such a time comes, members of the CCX will have the
valuable advantage of experience.
Carbon trading and other market-based schemes add a needed dose of economic practicality
to the emotionally charged issue of global warming. They help change the way we think
about emissions, energy efficiency and the environment.

3.3 CLEAN DEVELOPMENT MECHANISM:
The Clean Development Mechanism (CDM) is one of the flexibility mechanisms defined in
the Kyoto Protocol (IPCC, 2007) that provides for emissions reduction projects which
generate Certified Emission Reduction units which may be traded in emissions
trading schemes.
The CDM is defined in Article 12 of the Protocol, and is intended to meet two objectives: (1)
to assist parties not included in Annex I in achieving sustainable development and in
contributing to the ultimate objective of the United Nations Framework Convention on
Climate Change (UNFCCC), which is to prevent dangerous climate change; and (2) to assist
parties included in Annex I in achieving compliance with their quantified emission limitation
and reduction commitments (greenhouse gas (GHG) emission caps). "Annex I" parties are
those countries that are listed in Annex I of the treaty, and are the industrialized countries.
Non-Annex I parties are developing countries.
The CDM addresses the second objective by allowing the Annex I countries to meet part of
their emission reduction commitments under the Kyoto Protocol by buying Certified
Emission Reduction units from CDM emission reduction projects in developing countries
(Carbon Trust, 2009, p. 14). The projects and the issue of CERs are subject to approval to
ensure that these emission reductions are real and "additional." The CDM is supervised by
the CDM Executive Board (CDM EB) and is under the guidance of the Conference of the
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Parties (COP/MOP) of the United Nations Framework Convention on Climate Change
(UNFCCC).
The CDM allows industrialized countries to buy CERS and to invest in emission reductions
where it is cheapest globally .Between 2001, which was the first year CDM projects could be
registered and 7 September 2012, the CDM issued 1 billion Certified Emission
Reduction units. As of 1 September 2012, 63% of all CERS had been issued for projects
based on destroying either HFC-23 (42%) or N
2
O (21%).Carbon capture and storage (CCS)
was included in the CDM carbon offsetting scheme in December 2011.
However, a number of weaknesses of the CDM have been identified. Several of these issues
are addressed by the new Program of Activities that moves to approving 'bundles' of projects
instead of accrediting each project individually.

3.3.2 The CDM Project Cycle
The CDM has many specific requirements of its own, such as validation of a project and its
registration with the CDM Executive Board and monitoring, verification and certification of
GHG offsets. The various steps in a CDM project cycle, as defined by Marrakesh Accords
are shown in Table-1. The Table also depicts the parties that are responsible for carrying out
the particular process.

3.4 ATTAINMENT OF CER UNITS
CDM Project Cycle and Transaction Costs.
The various steps in a CDM project cycle are a must to ensure that the project activity
achieves the proposed emission reductions. The emission reductions are real and long term
and the project activity contributes to the sustainable development concerns of the host
country. The detailed documentations, various kind of agreements and mechanisms required
to ensure these adds up to the transaction costs. The large projects are able to absorb these
costs as these happen to be only a small fraction of the total project cost. Even if the absolute
transaction costs for small scale projects may seem low, the ratio of transaction cost to the
total cost comes to be very high in the small scale projects than in the large scale projects.




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Table.3.1 Steps to be followed for approval of CDM
Step Description Responsibility
Host / investor
country
approval
Approval at the national level, consistent with
domestic laws and political priorities;
Unless unilateral, investor approval is also required
- Project developer
- Designated
operational entity
Project design
document
Identification of a concept and developing project
design documents such as baseline estimate,
additionality, sustainable development
contributions, monitoring and verification plan and
stakeholders opinion
Project developer
Validation Third party validation of baselines and other
details to ensure that later verification provides
certified emissions reduction
Operational entity
Registration Registration of the project activity with the CDM
Executive Board, once it has got approval of host
country
Executive Board
on demand of
operational entity
Financing Investor providing capital in the form of debt or
equity; the investors may or may not be carbon
buyers;
Project developer
Implementation Building, commissioning and initiating operations Project developer
Monitoring During commissioning and further operations, the
progress and GHG offsets are to be monitored
Project developer
Verification An independent assessment of project performance
against the validated design, including the baseline
Operational entity
Certification
and issuance of
CERs
Based on the verification report, the CDM
Executive Board certifies and issues CERs
Executive Board





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3.4.1 STUDY OF CDM PROJECTS

CASE STUDY OF GUJARAT FLUOROCHEMICALS LIMITED (GFL)
About the company
The Group
Gujarat Fluorochemicals Limited (GFL) is a part of the $2 billion INOX Group of
companies. INOX is a family owned, professionally managed business group, with interests in
diverse businesses including Industrial Gases, Refrigerants, Chemicals, Carbon Credits,
Cryogenic Engineering, Renewable Energy and Entertainment. The INOX Group employs
more than 3500 people at more than 75 business units across the country, and has a distribution
network that is spread across more than 50 countries around the globe. Each INOX Group
company is characterized by three distinct characteristics - early identification of a winning
business idea, building it to a size of dominant market leadership in that segment, and attaining
profit leadership position through cutting-edge efficiency in operations.
Figure 3.1






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The Company
Gujarat Fluorochemicals Limited (GFL) is a public limited company, listed on both the leading
stock exchanges of India the Bombay Stock Exchange and the National Stock Exchange. It
was incorporated in 1987, and commenced commercial operations in 1989.

GFL has a market capitalization close to US $ 1 Billion , Gross Fixed Assets of US $ 225
million, Net Worth of US $ 250 million, and strong cash profits in excess of US $ 100 Million
per annum. GFL is rated AA (stable) by CRISIL, Indias largest rating agency.

Driven by the principle of conservative aggression, GFLs dynamic corporate team very
meticulously identifies and plans new projects and growth opportunities, which, once selected,
are aggressively implemented by a professional management team. As result of this approach
GFL has attained leadership position in each segment of its operations.

GFL attained a key milestone in 2007, when it commissioned Indias largest
Polytetraflouroethylene (PTFE) plant. PTFE is an extremely specialized engineering plastic,
and only a select few firms the world over have the technology for PTFE manufacture. GFL
also operates Indias largest refrigerant plant, which exports refrigerants to more than 75
countries across the globe.

GFL has been at the forefront in bringing the concept of carbon credits to India. GFLs CDM
project was the first in the world to seek registration by the CDM Executive Board, a body of
the United Nations Framework for Climate Change. GFL is the largest CDM player in India,
and amongst the top 5 globally. GFL has exhibited its strong emphasis on sustainable
development and corporate social responsibility through implementing this project.
GFL has been named Indias most Investor Friendly Company , Indias Best Managed
Company in the Chemical Sector American Express and Dun & Bradstreet.
GFL has been rated no.# 1 amongst Indias most Investor Friendly Company by Business
Today

Indias Best Managed Company in the Chemical Sector by American Express and Dun &
Bradstreet

Selected as one of Indias 100 best managed companies by Business Today Ernst & Young
study

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Refrigerant Business
GFL is Indias largest and most competitive producer of Refrigerant HCFC22. GFL has totally
phased out CFCs, three years ahead of the Montreal Protocol mandated phase-out schedule.
GFLs refrigerant plant, located at Ranjitnagar, Gujarat, is accredited ISO9001 :2000,
OHASAS 18001 :2007 & ISO14001 :2004

Around 95% of GFLs refrigerant production is exported to more than 75 countries across the
globe. Domestically, GFL is the preferred supplier of refrigerants to all the major OEMs in the
air-conditioning and refrigeration sector. Internationally, GFL has a strong distribution network
in more than 50 countries across the globe. GFL produces its own AHF (a feedstock for
HCFC22 manufacture) and has recently established a Joint Venture in China for AHF
production as well.

Chemicals Business
GFL has set up, at Dahej, Gujarat, an integrated chemical complex, which comprises of a
52,500 tpa Caustic Soda / Chlorine plant, a 40,000 tpa Chloromethane plant, and a 30 MW gas-
based captive power plant. These facilities were set up at a total investment of Rs 500 crores,
and have commenced commercial operations in 2007. These facilities will significantly enhance
GFLs cost competitiveness due to the advantages of backward integration, besides adding to
GFLs product portfolio, top-line and bottom-line from FY2008-09 onwards. These facilities
also have a significant potential for de-bottlenecking, with marginal investments, to further
improve profitability once full capacity has been reached.

GFL has also established an Anhydrous HCL plant, a first of its kind in India, and only the third
in Asia, to cater to the pharmaceutical and agriculture sectors in India.

PTFE Business
At its integrated chemicals complex at Dahej, GFL has also set up, at 6,000 tpa, Indias largest
PTFE plant, based on state-of-the-art international technology. This is a major technological
breakthrough since, the world over, PTFE manufacturing technology is controlled by a
handful of players.
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PTFE is a versatile and advanced engineering plastic, which has multiple applications across
industries, due to its outstanding chemical resistance, heat resistance, insulation, low-friction
and non-stock properties. PTFE is used in chemicals, textile, automobile, electrical, electronics,
and a host of other sectors. In rapidly growing economies like China, the demand for PTFE has
grown 5 times over the past 5 years. With its backward integration right upto Caustic Soda and
captive power, GFL is probably the worlds most integrated PTFE manufacturer. PTFE also
provides longevity to GFLs refrigerant business, and provides a platform to GFL to enter the
new-age refrigerants.
HFC-23 is a sub-product resulting from the HCFC-22 refrigerant manufacturing process that
has a powerful greenhouse effect. Until recently, it has been emitted into the atmosphere by the
factories in the South (the only ones still authorised to produce it, as specified by the Montreal
Protocol on the ozone layer).

Carbon Credits Business
Driven by its strong beliefs in the principles of Sustainable Development and Corporate Social
Responsibility, GFL has developed a UNFCCC-compliant Clean Development Mechanism
Project, which earns carbon credits by the thermal oxidation of a waste gas, HFC23, in its
refrigerant gas manufacturing plant. This was the first CDM Project in the world to seek
registration under the Kyoto Protocol, and has been approved by the Governments of India,
United Kingdom, Netherlands, Japan and Italy. Since commencement, this project has reduced
13 million tones of greenhouse gas emissions, and the carbon credits so earned have been sold
to leading companies across the globe for compliance purposes.
Renewable Energy Business










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3.5 CARBON CREDIT DISCLOSURE PATTERN
Table 3.2
Year Share Price (BSE)
April 2006 12042.45
March 2007 13072.1
April 2008 17378.46
March 2009 9708.5
April 2010 17558
March 2011 19445.22

Share prices has increased considerably due to revenue generated by carbon credits.
Usually if the revenue from the carbon credits is more than 10% than it is included in the
Revenue head of the profit and loss account of the company and if it is less than 10% than
it is included in the Other Income head of profit and loss account of the company.

GFL has implemented a CDM for reduction of its greenhouse gases by thermal oxidation of
HFC-23(a by-product of HCFC) which earns is carbon credits.
GFL generates revenue from five different segments viz. Chemicals (comprise of refrigerant
gases, anhydrous hydrochloric acid, caustic chlorine, PTFE, revenue from carbon credits),
Multiplexes, Power, Wind turbine generators and other segment.
Top line dropped 2% to Rs 12.2 bn in FY10, from Rs 12.4 bn in FY09, mainly on account of
a 10% decrease in revenues from the chemical business.
Operating margin stood at 40.4% in FY10 from 53.6% in FY09, a drop of 1320 basis points,
on account of lower spot prices of carbon credits and an increase in power and fuel cost by
54% as a percentage of sales, against FY09.






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Figure 3.2

Source: Annual report

Consequent on a business diversification study conducted by McKinsey & Co Inc. for the
Group, GFL has decided to invest in the Renewable Energy Business. Having worked in detail
on the concept development for this initiative for the past two years, GFL has firmed up its
business plan and is now in the process of aggressively implementing the same. GFLs vision is
to set up Indias largest Renewable Energy Company, with a total installed capacity of around
2000 MW in the next 5 years. In pursuance of this objective, GFL has already set up around 50
MW capacity in Maharashtra and Rajasthan. A study has already been carried out across States
to assess investment opportunities, based on policy framework, evacuation infrastructure and
financial rating of the State Electricity Boards. GFL is in the process of conducting scientific
site identification, wind pattern studies and energy output estimations using international
consultants to identify viable wind sites. GFL is also evaluating different options for acquiring
cost-efficient wind turbines through international competitive sourcing

GFL is convinced that with the present power shortage across Indian states, which is only
expected to be accentuated with Indias economic growth, and with the right kind of regulatory
impetus, the wind energy business can be developed into an environmentally friendly, socially
responsible and financially attractive business.
Chemical
62%
Multiplexes
17%
Power
16%
WTG
1%
Other
4%
Contribution to Revenue
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Monetary Value
Table 3.3
Bank Facilities Rated Amount Rating
Cash Credit Rs.697.5 Million AA-/Stable (Reaffirmed)
Rupee Term Loans Rs.5295.25 Million AA-/Stable (Reaffirmed)
Foreign Currency Term Loan Rs.2284.65 Million AA-/Stable (Reaffirmed)
Packing Credit Rs.5.6 Million P1+ (Reaffirmed)
Letter of Credit and Bank
Guarantee
Rs.1717.0 Million P1+ (Reaffirmed)


CRISIL has reaffirmed assigned bank loan ratings of AA-/Stable/P1+ to Gujarat
Fluorochemicals Ltds (GFLs) various bank facilities.

The ratings reflect the companys strong cash accruals from carbon emission credits,
comfortable financial risk profile, and expected synergies from integrated operations in the
chemicals segment. These rating strengths are partially offset by GFLs aggressive growth
strategy and high implementation and counterparty risks associated with its windmill project.

CRISIL expects GFL to maintain its moderately-conservative capital structure backed by a
phased implementation of its windmill project and strong cash accruals from the carbon
credits business. The outlook may be revised to Negative if GFLs gearing increases to
more than 1 time. Conversely, significant improvement in GFLs business risk profile and
gearing levels could result in a change in the outlook to Positive


Capacity under expansion
GFL has announced an expansion plan to increase its caustic soda production capacity to
17000 TPA, chloromethane capacity to 120000 TPA and PTFE capacity to 12500 TPA, at an
estimated investment of Rs 5 billion. The capacities are expected to be commissioned by
March 2011.GFL has also entered into the wind energy space, and plans to set up substantial
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capacity over the next few years. As of end FY-10, the company had installed wind power
capacity of 67 MW.GFL plans to add 400 MW of wind power capacity by FY 2013.

Projects contribution to Sustainable Development
The Project Activity contributes to the sustainable development of the region and country by
facilitating and catalysing sustainable operations of GFL, thereby creation of sustainable
shareholder, economic, social and environmental value.

The strategic objectives identified by the project to achieve the stated goals include improved
management of natural resources in the vicinity of the project activity, increased rural
incomes, reduced vulnerability and empowerment of the vulnerable sections of society. More
specifically, the project shall contribute to the sustainable development of the region and
country by addressing the following broad issues:

Policy and Development
a) The Project Activity is proposed in rural area (as is the GFL unit) thereby creating
employment opportunities in the rural areas in construction, operation and maintenance.
Creation of employment opportunities in rural areas has long been recognized as a major
concern for sustainable development and to stem the mass exodus from rural to urban areas.
This concern has formed the cornerstone of most of Government of Indias rural development
programs. To that extent, the activity directly addresses a core national concern.
b) The Project Activity is line with Government of Indias (GOIs) commitment to participate in
global initiatives to reduce GHG emissions in light of which, GOI has become a party to the
Kyoto Protocol.

Environment
a) The Project Activity shall result in significant reductions in GHG emissions as discussed in
the report.
b) The sponsors are carrying out an Environment Impact Assessment for the proposed Project
Activity and implement an Environment Management Plan to effectively mitigate adverse
environmental impacts of the project, if any.
c) The project is proposed in the existing plant premises and no new land is proposed to be
procured and diverted to the project.
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d) The sponsors, in light of the water scarcity in the region have in the past contributed to
construction of water management structures like check dams etc and propose to utilize part
of the CDM revenues towards facilitating improved management of water resources by local
communities, as one of the activities.
e) The sponsors, in light of the increasing incidence of cattle rearing as an income activity in the
vicinity, shall use part of the income from CDM to facilitate improved management of cattle
fodder by the local community.
f) The sponsors shall devote part of the income from the proposed project activity to create a
green belt on their premises and if permitted, undertake afforestation in village wastelands.

Socio economic
Present State of the Area
The project is located at Village Ranjitnagar, Taluka Devgadhbaria, District Ghoghamba,
Gujarat State, India, which is recognised as an industrially backward area. The area in the
immediate vicinity of the project (around 5 kilometres radius) consists of around 10 small
villages, with an aggregate population of around 50000. The nearest town, Halol, with a
population of around 50000, is more than 15 kilometres away. Per-capita income levels are
low and most of the population lives below the poverty line and suffers from lack of basic
amenities such as water (drinking and irrigation), energy and shelter. There is only one
primary school in the vicinity of the project. Most of the population is illiterate, and even
amongst those who are literate education levels are very low.

The primary occupation of the inhabitants of the local areas is agriculture. Very few of the
inhabitants own agricultural land, and most of the population works as unskilled agricultural
labour.

Agricultural practices are obsolete and inefficient due to lack of knowledge in proper
techniques resulting in poor soil productivity and crop yield.
The state of Gujarat, where the project activity is proposed, is not rated particularly
progressive on several social factors. This is reflected in the states sex ratio, which stands at
921 as compared to national sex ratio of 933, particularly the female literacy rate of 48% as
compared to the corresponding rate of 50% for India.

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Panchmahals District where the project is proposed has a sex ratio of 939, which is better
than the national and state average but the literacy rate of 64% and 38% for male and female
respectively are lower than the national average. The sex ratio in rural Panchmahals is 942
while the literacy rate is 62% and 34% for male and female respectively. While on sex ratio
the proposed site is better than state and national averages, the literacy rates are worse than
the national and state averages while its mixed when compared to the state rates.

There are no industries in the area. The few persons who are employed in industries have to
travel around 20 kilometres to work and are engaged in menial labour. Sanitation and hygiene
conditions are also very poor. Medical and veterinary facilities are almost non-existent
because of which humans and animals live in generally poor health.

The average rural main employment rate at 31% for the district is lower than the average for
Gujarat, which is at 33.66% and lower than the national average of 31.03% also. It is
pertinent to mention that where only 33.58% of rural main workers in Gujarat are
Agricultural labourers a higher 43% of the rural main workers in the district are agricultural
labourers. This occupation besides being periodic employment presents significant income
insecurity on account of numerous risks. Thus secure employment or stable income
opportunity on account of the in the rice husk based farm contributes significantly to
enhanced income security in the region.

Sustainable development activities
Against this backdrop, Gujarat Fluorochemicals Limited (GFL) can undertake the illustrative
list of initiatives given below to uplift the conditions of the area around the plant by providing
basic facilities of life and contribute towards sustainable development. GFL already has past
track record of demonstrating social responsibility through similar initiatives and sees this
project as another opportunity to illustrate the benefits of such community driven activities.





CARBON CREDITS: CASE STUDY ON GFL
PGDM
2013-15

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CHAPTER 4: CONCLUSION

In this project, I conclude that, CARBON CREDITS encourages the company to reduce their
greenhouse gas emissions.
CARBON TRADING is the way forward as it successfully addresses both financial as well
as environmental concerns. The companies can contribute to pollution reduction and also
make huge money out of it.
Companies can attain ample Carbon Emission Units through Clean Development Mechanism
projects.
An example of huge potential of carbon trading is GFL. The company is generating revenue
of around 500-700 crore annually from carbon trading business alone.
This shows how advantageous carbon trading is and according to me every company must
seriously consider the prospects of carbon trading and contribute to improve the global
climate change situation.


CARBON CREDITS: CASE STUDY ON GFL
PGDM
2013-15

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REFERENCES Websites:
http://en.wikipedia.org/wiki/Carbon_emission_trading
http://en.wikipedia.org/wiki/Kyoto_Protocol
http://en.wikipedia.org/wiki/List_of_parties_to_the_Kyoto_Protocol
http://unfccc.int/2860.php
http://en.wikipedia.org/wiki/United_Nations_Framework_Convention_on_Climate_C
hange
http://cdm.unfccc.int/press/releases/2012_22.pdf
http://www.devalt.org/newsletter/oct02/of_5.htm
http://www.mapleleafweb.com/features/kyoto-protocol-climate-change-history-
highlights
http://www.fern.org/sites/fern.org/files/tradingcarbon_internet_FINAL.pdf
http://www.gfl.co.in/
http://www.scribd.com/doc/9761422/Carbon-Trading-
http://en.wikipedia.org/wiki/Global_warming