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Publish Your Research Online. There are 98 active users right now. Mahesh Kumar Malav Category: India qualifies to be a host country for the CDM projects only. India is considered as one of the most potential countries in the world for CDM projects.
This is due to its large power sector that depends on fossil fuels, and to the proactive policies of the Indian government towards CDM. The power sector alone is estimated to emit million tonnes of CO2 per annum. Mahesh Kumar Malav, Sandeep Kumar, Lal Chand Malav, Sushil Kharia Introduction The concept of carbon credits came into existence as a result of increasing awareness of the need for controlling emissions.
The IPCC has observed that: Policies that provide a real or implicit price of carbon could create incentives for producers and consumers to significantly invest in low-GHG products, technologies and processes. A tradable credit can be an emissions allowance or an assigned amount unit which was originally allocated or auctioned by the national administrators of a Kyoto-compliant cap-and-trade scheme, or it can be an offset of emissions.
Such offsetting and mitigating activities can occur in any developing country which has ratified the Kyoto Protocol, and has a national agreement in place to validate its carbon project through one of the UNFCCC's approved mechanisms. These allowances can be sold privately or in the international market at the prevailing market price. Gases have different values depending on their global warming potential Methane 21 - 23 times more potent than CO2.
Carbon dioxide equivalents are commonly expressed as million metric tons of carbon dioxide equivalents, abbreviated as MMTCDE. This means that emissions of 1 million metric tons of methane and nitrous oxide respectively are equivalent to emissions of 21 and million metric tons of carbon dioxide. Objective of trading carbon credits It is to steer companies and countries to lower their greenhouse gas emissions.
Those that do not exhaust their cap are allowed to sell them in the market or to those companies in need of them. So, those who do not use up their entire permissible amount are rewarded by being allowed to sell their credits, while those who exceed their cap are penalized by having to pay for more credits.
Global Scenario With the progress of mankind there has been an increasing adverse effect on the global environment due to hazardous emissions including carbon. This has caused what we know of as global warming. To address this issue of global warming, the United Nations Framework Convention on Climate change UNFCCC was adopted in , with the objective of limiting the concentration of green house gases in the atmosphere.
Subsequently, to supplement the convention, the Kyoto Protocol came into force in February , which sets limits to the maximum amount of emission of GHGs by the countries. This protocol has created a mechanism under which more than countries have agreed to reduce green house gas emissions globally.
Carbon market is the brain child of the Kyoto Protocol for controlling green house gas emissions. This market is mainly regulated by Clean Development Mechanism CDM , which allows carbon credit earnings and carbon trading between countries and companies, establishing carbon credit exchange in the business world.
As the first commitment period of the Kyoto Protocol in is completing nearly, it is important to take stock of global scenario of the carbon business and its achievement level ITARC, According to Kyoto Protocol, countries with binding emission reduction targets which are represented by Annex- I countries in order to meet the assigned reduction targets are issued allowances carbon credits equal to the amount of emissions allowed.
An allowance or carbon credit represents one metric tonne of carbon credit equivalent. To meet the emission reduction target, binding countries ask their local businesses and entities to purchase carbon credits from the developing countries non Annex-I countries who are not bound by the amount of GHG emissions. At present, European Union is the major purchaser of carbon credit and Asia dominates the seller market led by China.
The volume of carbon markets mainly depend on the national emission reduction target of GHG gases of the developed countries. In , there were more than projects registered worldwide to participate in the carbon trading mechanism. Eligibility Requirements According to the United Nations, to participate in the mechanisms, Annex I Parties must meet, among others, the following eligibility requirements: Financial support and participation in India Carbon Credits projects requires huge capital investment.
India signed and ratified the Kyoto Protocol in August Since India is exempted from framework of the treaty, it is expected to gain from the protocol in terms of transfer of technology and related foreign investments. India was an early player in the market and it hosted the Eighth conference of parties to the UNFCCC in Delhi in October , to sensitize the business community about the opportunity provided by the carbon finance and the modalities of the emerging CDM.
The initiative makes it Asia's first-ever commodity exchange and among the select few along with the Chicago Climate Exchange CCE and the European Climate Exchange to offer trades in carbon credits. The Indian exchange also expects its tie-up with CCX which will enable Indian firms to get better prices for their carbon credits and better integrate the Indian market with the global markets to foster best practices in emissions trading.
People here are getting price signals for the carbon for the delivery in next five years. The exchange is only for Indians and Indian companies. Every year, in the month of December, the contract expires and at that time people who have bought or sold carbon will have to give or take delivery. They can fulfill the deal prior to December too, but most people will wait until December because that is the time to meet the norms in Europe.
If the Indian buyer thinks that the current price is low for him he will wait before selling his credits. The Indian government has not fixed any norms nor has it made it compulsory to reduce carbon emissions to a certain level. So, people who are coming to buy from Indians who are actually financial investors.
They are thinking that if the Europeans are unable to meet their target of reducing the emission levels by , or , then the demand for the carbon will increase and then they may make more money. So investors are willing to buy now to sell later. There is a huge requirement of carbon credits in Europe before There are parameters set and detailed audit is done before you get the entitlement to sell the credit. India's role in world carbon trade Since India is a developing nation, it does not come under the ambit of the Kyoto Protocol.
So, we can use our developing country status to let any Indian company, factory or farmer link up with the United Nations Framework Convention on Climate Change and determine the permissible 'standard' level of carbon emission for its specific field of activity. For the amount of low carbon emissions made by an Indian company, the developed nation earns carbon credits.
India has generated about 30 million carbon credits and has a line-up of about million to introduce into the global market. These comprise chemical units, plantation companies, municipal corporations and waste disposal units that can easily sell their carbon credits for good amounts of money.
This is possible because India has credits for emitting carbon below the permissible limits and so has enough credit to offer defaulting countries. With this facility, India can trade her carbon credits for large loans, better social visibility and ecological facilities and lucrative incentives by multinationals in their home countries.
Conclusion Carbon credit is an umbrella term for a certificate or permit that allows an organization or a country to manufacture a fixed amount of carbon emissions which can be bartered if the full fixed allowance is not fully used. Though Carbon Credit is definitely a very lucrative proposition for both the buying and selling countries, it is the environment which pays the heaviest price, as the GHG emitting countries cause environmental degradation by polluting it. We live in a world where a balance has to be maintained but in the present situation we are disrupting the balance and the future generations will have to pay a heavy price as they will live in an unhealthy environment.
Hence strict laws should be imposed to limit the buying and selling Carbon Credits. Scientists must use their time, money, and all available resources in order to find substitutes for the carbon emitting fuels currently being used so that the environment does not suffer any damage at all.
They could use sustainable development programs via renewable or zero carbon emission fuel. Countries need to be the change which they want to see in this world. Trading the origins of the kyoto protocol: An article-by-article textual history, August, I am currently pursuing Ph. D in Environmental science.
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