UNDERSTANDING

Lveiy uay nevsaeis acioss gloLe ieoir on auveise

eecrs o gloLal vaiming.
Ice glacieis aie melring in rle oirl anu Sourl Pole
aecring rle maiine lie. Orlei auveise eecrs aie climare
clange, naruial calamiries erc. Nany secies aie on rle
veige o exrincrion uue ro gloLal vaiming. One uay ir
coulu Le rle enu o luman kinu as vell.
In oiuei ro conrain rlese laimul gases rleie vas an
agieemenr - Kyoro Piorocol in 199
Lerveen vaiious counriies.
1le Kyoro Piorocol vas maue unuei
rle Unireu arions Iiamevoik
Convenrion on Climare Clange
(UICCC). Counriies rlar iariy
rlis iorocol commirreu ro ieuuce
rleii emissions o caiLon uioxiue
anu ive orlei gieenlouse gases
(varei vaoui, caiLon uioxiue,
merlane, nirious oxiue, anu
ozone.), oi engage in emissions
riauing i rley mainraineu oi
incieaseu emissions.
o one voulu lave rlouglr in 199 rlar emission riauing
voulu Le a Looming Lusiness ooiruniry in rle coming
yeais.
Emissions trading is an auminisriarive aioacl useu oi
conriolling ollurion Ly ioviuing economic incenrives
oi aclieving ieuucrions in emissions.
In sucl a lan, a cenrial aurloiiry usually a goveinmenr
agency sers a limir on rle amounr o a olluranr rlar can
Le emirreu. Comanies oi orlei
gious rlar emir aie iequiieu ro
lolu an equivalenr numLei o
cieuirs oi allovances vlicl
ieiesenr rle iiglr ro emir a seciic
amounr o emission. 1le roral
amounr o cieuirs cannor exceeu
rle limir rleie Ly conriolling roral
emissions ro rlar level. Comanies
rlar neeu ro inciease rleii emissions
musr Luy cieuirs iom rlose vlo
ollure less. 1lis riansei o
allovances is rle caiLon riaue. In
eecr, rle Luyei is Leing ineu oi
olluring, vlile rle sellei is Leing
ievaiueu oi laving ieuuceu emissions.
Accoiuing ro kyoro iorocol rleie aie Annex I anu on-
annex I counriies. Annex I Kyoro counriies aie rlose rlar
aie iequiieu ro limir anu ieuuce emissions, vlile non-
Annex I Kyoro counriies aie nor limireu. on-Annex I
counriies sucl as Biazil, Clina, anu Inuia lay an
imoiranr air in Kyoro as rley aie aLle ro losr
enviionmenral iojecrs rlar seive as comliance
meclanisms oi Annex I counriies. 1lese comliance
iojecrs aie geneially uesciiLeu as Kyoro IlexiLle
Neclanisms.
Ilexible Mechanisms
1le Naiiakecl accoius in 2001 esraLlisleu rle iules anu
meclanisms oi Kyoro's ca-anu-riaue sysrem. 1liee
lexiLle meclanisms veie esraLlisleu ro allov iegulareu
olluring enriries in caeu counriies (Annex I) ro acquiie
iiglrs ro ollure Leyonu rleii assigneu limirs. 1lese
meclanisms aie Clean Development Mechanism
(CDM"), ]oint Implementation (]I") and Emissions
Jrading.
Carbon credit Jrading
Scurce : glcbaluarhingart.cch
rcbert rclJe
Jhe status of the Protocol as of 2006
As o DecemLei 2006, a roral o 169
counriies anu orlei goveinmenral
enriries lave iariieu rle agieemenr
(ieiesenring ovei 61.6 o emissions
iom Annex I counriies). oraLle
excerions incluue rle Unireu Srares anu
Ausrialia. Orlei counriies, like Inuia anu
Clina, vlicl lave iariieu rle iorocol,
aie nor iequiieu ro ieuuce caiLon
emissions unuei rle iesenr agieemenr.
UNDERSTANDING
1le CDN anu ]I aie iojecr-Laseu meclanisms vlile
Lmissions 1iauing means rlar an Annex I olluring enriry
can riaue virl anorlei Annex I olluring enriry oi rleii
iiglrs ro ollure. Suilus cieuirs rlar aie acquiieu Ly
oveislooring rle emission ieuucrion raiger can Le solu in
rle gloLal maiker. One cieuir is equivalenr ro one ronne o
CO emission ieuuceu. CaiLon cieuirs aie availaLle oi
2
comanies engageu in ueveloing ienevaLle eneigy
iojecrs rlar oser rle use o ossil uels.
Market Benefit
CDN anu ]I iojecrs aie consiueieu oser iojecrs.
Naiker exeiiences suggesr rlar rle cosr o uiclasing an
oser ioma iojecr renus roLe 15-32lovei rlanriauing
oi anallovance inrle oenmaiker.
1o illusriare rlis concer ve vill rake a ovei geneiaroi
in Denmaik as an examle. Ler us say rlar ir is a veiy
vaimsummei in Denmaik anu rlis las causeu rle ovei
geneiaroi ro Luin moie coal ro sell moie elecriiciry ro irs
clienrs (vlo use ir ro cool rleii lomes).
ov, ler's assume rlar rle Denmaik ovei geneiaroi
ieacles irs limir in miuule o rle yeai. 1le geneiaroi
las conriacrs virl irs clienrs ro sell rlem elecriiciry
oi rle iesr o rle yeai, Lur rley lave useu all rleii
ollurion iiglrs. 1le geneiaroi vill nov consiuei
irs orions.
1. Do nothing - Pay 100 Luios/ronne rax ar rle enu o rle
comliance eiiou
2. Emissions Jrading - Iinu an Annex I ovei geneiaroi
virl ollurion iiglrs ler ovei anu uiclase rlose
iiglrs oi maiker iices (cuiienrly 23 Luios/ronne)
3. CDM/]I - Iinu an enviionmenral iojecr rlar las
ioven ir las ieuuceu caiLon uioxiue in a on-Annex
I counriy anu uiclase rlose iiglrs oi maiker iices
(cuiienrly 10-15 Luios/ronne)
Developer Benefit
1le ueveloei las rliee Leneirs
1. Reuuces Lmissions
2. Gers rle usual ievenue associareu virl rle Lusiness
mouel o rle coie Lusiness
3. Gers ro uirlei ievenue rliougl caiLon riauing
1le Leneir o a ieuucrion iojecr is rlar rle unus go
rovaius rle uevelomenr o an enviionmenrally
Leneicial iojecr rlar voulu nor lave Leen aLle ro go
oivaiu virlour rle auuirional srimulus iesulring iom
concein oi climare clange mirigarion. Ioi many iojecrs
rlar involve ienevaLle eneigy rle Leneir is Lorl in
neeueu eneigy geneiarion anu caiLon cieuir ievenue.
Clean Development Mechanism (CDM) and ]oint Initiative (]I)
1le uieience Lerveen CDN anu ]I is geogialical anu ioceuuial. A CDN iojecr involves an Annex I enriry
invesring in a iojecr in a on-Annex I counriy. A ]I iojecr involves one Annex I counriy invesring in a caiLon
iojecr in anorlei Annex I counriy.
1le CDN is oveiseen Ly rle CDN Lxecurive Boaiu, vlicl is essenrially a anel o UICCCaoinreu exeirs. ]I
vill allov oi moie auronomy in rle ciearion o Piojecrs, as rle losr counriy vill Le iesonsiLle oi iojecr
ceiriicarion. 1le ioceuuies oi ciearing cieuirs vill vaiy iomcounriy ro counriy. 1le CDN is a mucl laigei anu
moie maruie meclanism as ir las Leen geneiaring cieuirs since 2004, vleieas ]I vill Legin geneiaring cieuirs in
200S.
1le lovei economic anu olirical iisks aie likely ro make ]I an arriacrive merlou oi rle ciearion o comliance
osers. Accoiuing ro rle Woilu Bank, in 2006 rle CDN maiker vas voirl $5.2 Billion anu rle ]I maiker vas
voirl $141 Nillion. Borl o rlese maikers giev Ly 300 comaieu ro 2005. Inirial esrimares Ly rle Woilu Bank
lave ounu rlar riansacrions oi rle iisr 3 monrls o 200 veie equivalenr ro all riansacrions in 2006.
UNDERSTANDING
1le cieuirs aie monerizeu vlen rle iojecr ueveloei sells
rlem ro a rliiu airy (ossiLly a ovei geneiaroi in an
Annex I counriy). 1lis is consiueieu a iimaiy maiker
riansacrion anu makes u S5 o rle cuiienr.
Carbon Pro|ect Cycle
1le olloving aie rle vaiious srages rlar a caiLon
emissions ieuucrion iojecr vill geneially ollov on irs
vay ro cieuir ciearion anu rleieoie monerizarion o rle
caiLon Cieuirs:
1. Iuenriicarion o Porenrial CaiLon Lmission Reuucrion
Piojecr
2. IeasiLiliry Sruuy
3. Lnviionmenral Naiker Analysis
4. Iuenriicarion o Piojecr Pairneis
5. Lerrei o Aioval iomHosr Counriy
6. Piojecr Design Nareiials SuLmirreu ro Auuiroi
. Piojecr ValiuareuByUICCCCDNLxecurive Boaiu
S. Piojecr Commencemenr
9. Annual Veiiicarion &CLR(CaiLon Cieuir) Issuance
Pro|ect Example:
Name of the Pro|ect:
12 NW Winu Llecriiciry Geneiarion Iaim ar
RaulauiamLy N/s Suiana Inuusriies Limireu ar 1aluka
Raulauiam, Disriicr 1iiunelveli, 1amil auu.
Pro|ect
1le iojecr acriviry involves geneiarion, oeiarion anu
mainrenance o vinu eneigy geneiarois. 1le iooseu
iojecr consisrs o S vinu ruiLines o 1.5 NW eacl anu
aims ar geneiaring 12 NW o elecriiciry iom ienevaLle
souices, namely vinu eneigy rleieLy uislacing rle
elecriiciry iomrle giiu rlar is mosrly iouuceu Ly caiLon
inrensive ossil uels like coal.
Scurce: cJhinJia.nic.in
Carbon credit in India
1le Nulri-Commouiry Lxclange o Inuia (NCX), rle
counriy's leauing commouiry exclange, may soon
Lecome rle rliiu exclange in rle voilu virl a licence ro
riaue in caiLon cieuirs.
1le Clicago Climare Lxclange (CCX), oirl Ameiica's
iisr anu only mulri-secroi maikerlace oi ieuucing anu
riauing gieenlouse gas (GHG) emissions, rouay
announceu a licensing agieemenr virl NCX. Nany
Inuian comanies lave alieauy Leen ie-iareu on rle srock
maikers on rle Lasis o rle Lonanza rlar vill acciue ro
rlemvlen caiLon riauing kicks o.
Unuei rle agieemenr, rle Clicago exclange vill lisr mini-
sizeu veisions o irs Luioean Climare Lxclange (LCX)
CaiLon Iinancial Insriumenrs (CII) anu Clicago Climare
Iuruies Lxclange, Sului Iinancial Insriumenr uruies
conriacrs on rle NCX riauing laroim.
India is considered as the largest beneficiary, claiming
about 31 per cent of the total world carbon trade through
the Clean Development Mechanism (CDM). It is expected
to rake in at least S5 billion to S10 billion (Rs 22,500
crore to Rs 45,000 crore) over a period of time.
1le ace ar vlicl rlis secroi is evolving ve may soon see
a ueuicareu unu invesring in inancing caiLon cieuir
iojecrs.