Do you think

that only a
magician can
make money
out of thin air

No, a Company can

also do the same
 By:
Gunjan Ganatra
Imran Parkar
Kamlesh Prajapati
Mitesh Doshi
Nikhil Thakkar
 Agenda
Meaning and Background of CARBON CREDIT

Trading Mechanism

Emerging Issues for Chartered Accountants

Criticisms

Recent development in India

 Meaning and Background
 Meaning

 Greenhouse Effects

 United Nations Framework convention on Climate

Change (UNFCCC )

 Kyoto Protocol and its Mechanisms

 Mechanism of acquiring credit under Kyoto protocol
Joint Implementation (JI)
Advanced Advanced
Fund and
A system under which advanced country A Technology country B
countries jointly implement a
Joint emissions
JI project, and the countries that reduction projects
invest in the project can use the
Amount of
amount of emission reduced by
emission reduced
the project to achieve their Amount of
targets. emission reduced

Clean Development Mechanism Advanced

Fund and Developing
(CDM) country A Technology country B
A system under which advanced Joint emissions
country and a developing country reduction projects
CMD jointly implement a project, and the
country that invest (Advanced Amount of
country) in the project can use the emission reduced
amount of emission reduced by the Amount of
emission reduced
project to achieve their targets.

Emissions Trading
Advanced Money Advanced
A system under which advanced country A country B
ET Emission reduction
countries sell and buy emissions to
Emission Allowance in excess of target
achieve their respective targets of
emission reduction.
Trading in Carbon Credits

Markets and Price determination

Indian Scenario
Price Determination
Indian Scenario
India as a Potential Supplier

Alliance of Multi Commodities Exchange (MCX) with

Chicago Climate Exchange (CCX)

Brief idea of the Operations of the MCX

India as a Potential
Supplier

Can provide low cost low emission technology

The World Bank has purchased CERs from 10

Indian Companies
Role of MCX
MCX - First exchange in Asia to trade in carbon

credits

Platform for buyers and seller

Other advantages

More than 112 companies trading in carbon credits

Emerging Issues for CAs

Accounting Issues
 Treatment in Financial Statements

 Applicability of Accounting Standards

Taxation Issues
 Direct Tax

 Indirect Tax
Criticisms of Carbon
Credit
LICENSE TO INCREASE POLLUTION BY 25%
Installation of New
Technologies
Increase in Product Cost
No Incentive for Preservation of Existing
Forest
Reduction of Estimated Carbon Credit

reduction by
30%
from estimated
credit level
Looking into the Future
Huge demand

India contributes 43%

MCX appoints IDEA carbon, Singapore a rating

agency as its Strategic advisor

Sources
UNFCCC.int
wikipedia.com
rediff.com
mcxindia.com
ICAI Journal
World Bank Report 2007
Vincentgioia.com
IDBI.com