Carbon credits allow entities to emit one ton of carbon dioxide. They are awarded to countries or groups that reduce emissions below quotas and can be traded internationally. Presently, Australia, the US, former Soviet Union, Japan, EU, China, Indonesia, and India account for most emissions. Carbon credits are acquired through mechanisms like the Clean Development Mechanism which allows developed countries to sponsor projects in developing countries. Credits are created through compliance markets governed by UN standards or voluntary markets accredited by independent standards. Buying credits funds carbon reduction projects and helps lower costs of renewable technologies. Trading credits globally impacts emissions, while generating profits allows India to invest in advancing technologies. Common carbon projects include renewable energy, forestation, energy efficiency, and
2. Contents
• What is Carbon Credit ?
• Present scenario
• How are carbon credits acquired ?
• How are carbon credits created ?
• How buying carbon credit can reduce emission ?
• How do carbon credits impact global emissions?
• Role of India
• Different types of carbon projects
• Benefits for India
• Solutions ??
• Conclusion
3. What is Carbon Credit ?
Basically it’s a permit that allows the holder to
emit one ton of carbon dioxide. Credits are
awarded to countries or groups that have
reduced their green house gases below their
emission quota. Carbon credits can be traded
in the international market at their current
market price.
5. How are carbon credits acquired ?
Three mechanisms have been made through which
countries can acquire carbon credits:
Kyoto’s flexible mechanism
Joint
implementation
Clean
development
mechanism
International
emission
trading
6. •Under Joint Implementation(JI) a developed country
with relatively high costs of domestic greenhouse
reduction would set up a project in another
developed country.
•Under the Clean Development Mechanism(CDM) a
developed country can 'sponsor' a greenhouse gas
reduction project in a developing country where the
cost of greenhouse gas reduction project activities is
usually much lower, but the atmospheric effect is
globally equivalent.
•Under International Emissions Trading (IET)
countries can trade in the international carbon
credit market.
7. How are carbon credits created?
Types of carbon credit
market
Compliance Market
credits
Voluntary Market
credits
8. In this market Carbon Credits are
generated by projects that operate
under one of the United Nations
Framework Convention on Climate
Change (UNFCCC) approved
mechanisms such as the Clean
Development Mechanism
(CDM).Credit generated under this
mechanism are known as Certified
Emissions Reduction(CERs)
In this market Carbon Credits are
generated by projects that are
accredited to independent
international standards such as the
Verified Carbon Standard (VCS).
These credits are known as Verified
Emission Reductions (VERs).
Compliance Market Voluntary Market
Carbon Trade Exchange supports the trading of both
voluntary and compliance credits.
Ex : CO2E Exchange in UK, CDM Exchange in Europe and the Chicago
Climate Exchange (CCX).
9. Where are carbon credits held?
Carbon credits are stored electronically in ‘registries’.
Registries are essential for issuing, holding, and transferring
carbon credits. Once a carbon project is issued with credits, the
registry gives each one a unique serial number so that they can
be tracked through their entire life-cycle. Registries also
facilitate the retirement (surrendering) of credits for carbon
neutrality purposes, ensuring credits are not resold at a later
date.
The largest registry is the MarkIt Environmental Registry
which is directly connected to Carbon Trade Exchange (CTX)
and CTX is connected to various national registries in the EU
via Climat’s Registry Electronic Interface (REI).
10. How Buying Carbon Credits Can Reduce
Emission ?
Factory
Emissions
100000 tones
per year.
Permissible
limit 80000
tones
Factory either
reduces
emissions or
purchase
carbon credits
Invests in new
machinery to
reduce
emission
11. How do carbon credits impact global emissions?
Carbon credits are an immediate answer to reducing
the amount of Green House Gas (GHGs) emissions in
the atmosphere. The generation and sale of carbon
credits funds carbon projects which would not have
gone ahead i.e. additional to business as usual. Carbon
credits also help lower the costs of renewable and low
carbon technologies as well as assisting in the
technology transfer to developing countries.
12. Role of India
• 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.
• According to industry estimates, Indian companies are
expected to generate at least $8.5 billion at the going rate
of $10 per tonne of Certified Emission Reduction (CER).
• India is the world’s sixth largest emitter of carbon dioxide
with its present share in global emissions estimated at 6
per cent
13. Different types of carbon projects
• Renewable energy: a switch from fossil fuels to a ‘clean’ energy
e.g. wind and solar energy
• Forestation and Afforestation: The planting of new trees as trees
sequester and store CO2 e.g. forest regeneration
• Energy efficiency: reducing emissions though an increase in
energy efficiency e.g. installation of energy-efficient machinery
• Methane capture: avoiding methane emissions through capture
and burning to create energy e.g. landfill methane capture
Project eligibility for carbon credits depends on whether a project
follows one of the Kyoto Protocol’s project-based mechanisms or an
independent voluntary standard.
14. Benefits for India
•It will gain in terms of advanced technological
improvements and related foreign investments.
• It will contribute to the underlying theme of
green house gas reduction by adopting alternative
sources of energy.
•Indian companies can make profits by selling the
CERs to the developed countries to meet their
emission targets.
15. Solutions ??
Emission trading allows countries or groups to sell
credits to countries that are over their target.
Typically in countries organisations assist them in
reduction of emissions, by planting trees and
plants, some organisations include this as an activity
under their corporate social responsibility.
By reducing Carbon emissions, activities which
remove CO2 from the atmosphere can be
encouraged. This is where forests come in.
16.
17. Conclusion
Acquiring and selling carbon credits has resulted in a
new form of trading, carbon credit trading. The credit
system is going to gain popularity as the emission
levels are increasing constantly, buying and selling of
credits is going to increase over as organisations and
countries are joining the system. Reduction of Carbon
Dioxide and Green House Gases are necessary.