CARBON TRADING

Agenda
Introduction
Global warming
Kyoto protocol
Global trading system
Indian scenario
Benefits and disadvantage of carbon trading
Industrialization
Power and wealth of the country strongly depends
on industrialization.
Every country tries to become industrialized.

Problem starts here

 8
Carbon (109 metric tons)

Total
7 Liquid fuel
6 Solid fuel
Gas fuel
5
4
3
2
1
0
1750 1800 1850 1900 1950 2000
Year
The atmosphere now holds 30% more
carbon than a century ago.
Future Carbon Dioxide
Levels
Increasing CO2 emissions, especially in China
and developing countries

Likely to double within 150 years:

Increased coal usage
Increased natural gas usage
Decreased petroleum usage (increased cost and
decreasing supply)
Explanation of the causes of global
warming
Green house gases
(GHG)
carbon dioxide (CO2)

methane (CH4)

nitrous oxide (N2O)

hydrofluoro-carbons (HFCs)

perfluorocarbons (PFCs) and

sulphur hexafluoride (SF6).

Greenhouse gas emissions are calculated in CO2-

equivalent metric tons (CO2e)
Why should we be concerned about Global
Warming?
 Ice Sheets
Melting!!
GRACE (gravity measured by
satellite) found melting of
Antarctica equivalent to sea
level rise of 0.4 mm/year (2
in/century)

Zwally, 2005 (satellite radar

altimetry) - confirmed
Antarctica melting & Greenland
ice melting on exterior,
accumulating inland
(higher precipitation)
Summer Arctic Sea Ice

1979

2000

NASA Goddard Space Flight Center

Two studies showed the total number of
hurricanes has not changed

However, the intensity of hurricanes has

increased (more category 4 and 5 hurricanes and
cyclones)

Probably due to higher sea surface temperatures

(more energy)

Difficult to know if this trend will continue

We are here
Polar Bears
Require pack ice to live
Might eventually go extinct in the wild
Sea turtles
Breed on the same islands as
their birth
Could go extinct on some islands
as beaches are flooded
Other species may go extinct as rainfall patterns
change throughout the world
Fewer deaths from cold, more from heat
Decreased thermohaline circulation
Cooler temperatures in North Atlantic
CO2 fertilization effect

Precipitation changes
Droughts and famine (some areas)
Expanded arable land in Canada, Soviet Union
The Kyoto Protocol is an amendment to the United
Nations Framework Convention on Climate Change

Signed on December 11, 1997

Location Kyoto, Japan

Parties 181 countries and the European Union (as

of May 2008)
Objective
"stabilization of greenhouse gas
concentrations in the atmosphere at a level
that would prevent dangerous anthropogenic
interference with the climate system”
IET- international emission
trading

CDM- clean development

mechanism

JI- joint implementation

AAU- assigned amount units

CER- carbon reduction units

ERU- emission reduction units

1. International Emission Trading
(IET)

enables countries with legally binding

emission targets to buy and sell emissions
allowances among themselves
Each country has a certain number of
emission allowances (amount of carbon
dioxide it can emit) in line with its Kyoto
reduction targets
The IET allows industrialized countries to trade
their surplus credits on the international
carbon credit market
Example
Allowance to US and india is 100 credits.

But US emits 150 credits of carbon

And india emits 50 credits of carbon

India can sell the excess credits to US.

2. Clean development Mechanism
(CDM)
Factors affecting CER
Nature of project (renewable, energy
efficiency , others)
• Maturity of the credits

Stage of the project

International availability and demand of

credits
An example
• Carbon trading - Norwegian firm Vs brazil
Norwegian firm produce methane (which
double effect of CO2 on climate change).
• Brazil plant trap methane and burn it.
Norway would get the credit equivalent to
670,000 tons of CO2 and Brazil the cash,
currently $10.98 per ton.
Advantages of emission Trading
• Emitters are given flexibility and control
Rewards innovation and investment in new
technology
• Common price signal ensures that reductions
take place where they are least costly
achieves environmental goals at least cost
The overall cap on emissions ensures
environmental objective is achieved
Disadvantages of Emission Trading

• Still requires monitoring, reporting, verification and

compliance infrastructure - like traditional
regulation
• May result in increased local concentrations of
emissions
Price is uncertain – determined by market
Relies on a price signal – some markets may be
less efficient
• Allocation of target/allowances is highly
contentious
3. Joint Implementation

• Projects between industrialized nations to earn

emission offsets
• Emission reduction units (ERUs) created
through joint implementation is treated in the
same way as those from emissions trading
Creating carbon credits
India’s CDM projects which passed validation stage
India’s potential
• • India – Non Annexure I country, has a large
scope in emissions trading
• • India and china together contribute to $5
billion of the global carbon trade estimated at
$30billion
• It is one of the leading generators of CERs
through CDM
• • Analysts forecast that its trading in carbon
credits would touch US$ 100 billion by 2010
• • Currently, the total registered CDM projects are
more than 300, almost 1/3rd of the total CDM
projects registered.
• The total issued CERs with India as a host
country till now stand at around 34 million, again
around 1/3rd of the total CERs.
CER – Source of Generation
• Industries like
Agriculture
Energy (renewable & non-renewable sources)
Manufacturing
Metal production
Mining and mineral production
Chemicals
Afforestation & reforestation
References
Butt, T. A., and McCarl, B. A. “ On-Farm Carbon Sequestration: Can Farmers
Employ it to Make Some Money?”
Available online at:
http://agecon2.tamu.edu/people/faculty/mccarl-bruce/ecomitigate.html
Fisher, C., S. Kerr and M. Toman. “Using Emissions Trading to Regulate U.S.
Greenhouse Gas Emissions: An Overview of Policy Design and
Implementation Issues.” Discussion Paper 98-40, July 1998. Available
online at: http://www.rff.org/Documents/RFF-DP-98-40.pdf
Gangadharan L. "Transactions Costs in Pollution Markets: An Empirical Study."
Land Economics 76(2000): 601-614.
Gunasekera, D., and A.Cornwell. “ Economic Issues in Emission Trading.”
Paper to Kyoto the Impact on Australia Conference, Melbourne, 12-13 Feb.
1998. Available online at: http://www.apec.org.au/docs/Gunasek.pdf
McCarl, B. A.., and U. A. Schneider. “Curbing Greenhouse Gases: Agriculture’s
Role.”
Available online at:
http://agecon2.tamu.edu/people/faculty/mccarl-bruce/ecomitigate.html
McCarl B. A. and U. A. Schneider. “U.S. Agriculture’s Role in a Greenhouse Gas
Emission Mitigation World: An Economic Perspective.” Review of Agr. Econ.
22(2000):134-159.
McCarl, B. A.., and U. A. Schneider. “ The Cost of Greenhouse Gas Mitigation in
U.S. Agriculture and Forestry.” Science, 294 (December, 2001): 2481-82.
World at night

Thank you
More Important Data
• The Kyoto Protocol
will result in only
modest emission
reductions
– The US has not yet
ratified this treaty
• We already have
technologies that
can help us on the
way
– Efficiency
– Renewable Energy
– Coal-gasification with
carbon sequestration
• The behavioral
challenges are
much more
daunting than the
technological ones.
• Climate change
isn’t likely to affect
our generation.
• We need to make
changes for
subsequent
generations.
 Mitigation of Global
•
Warming
Conservation
– Reduce energy needs
Recycling

Alternate energy sources

Nuclear
Wind
– Geothermal
Hydroelectric
Solar
– Fusion