Carbon Credit

Foundation Course II Project Prof. Sanghamitra Presented to:-

Group Members:- Sarvesh Kumar Tiwari – 3315 S.Y.Bcom / C Dhaval .V .Shah – 3266 S.Y.Bcom / C Bharat Suresh Kumar – 3266 S.Y.Bcom / C

Carbon Credit & Carbon Banking

What is Carbon credit and Carbon Banking ,[object Object]

One Carbon Credit is equal to one ton of Carbon.

Application emissions trading approach.

Low emissions or less "carbon intensive" approaches,[object Object]

Emission Allowances Maximum amount of Greenhouse gases for developed and developing countries, listed in its Annex. Quotas on the emissions of installations run by local business and other organizations Each operator has an allowance of credits, where each unit gives the owner the right to emit one metric tonne of carbon dioxide or other equivalent greenhouse gas. By permitting allowances to be bought and sold, an operator can seek out the most cost-effective way . Since 2005, the Kyoto mechanism has been adopted for CO2 trading. From 2008, EU participants must link with the other developed countries who ratified Annex I of the protocol.

Kyoto’s ‘Flexible mechanisms’ Originally allocated or auctioned by the national administrators of a cap-and-trade program, or it can be an offset of emissions. Offsetting and mitigating activities can occur in any developing country which has ratified the Kyoto Protocol. The Kyoto Protocol provides for three mechanisms:- Joint Implementation (JI). Clean Development Mechanism (CDM). Emissions Trading (IET)

Emission Markets A. Introduction One allowance or CER is considered equivalent to one metric tonne of CO2 emissions. These allowances can be sold privately or in the international market. Climate exchanges have been established to provide a spot market in allowances. It help discover a market price and maintain liquidity. Carbon prices are normally quoted in Euros per tonne of carbon dioxide or its equivalent (CO2e). These features reduce the quota's financial impact on business.

B. There are five exchanges trading in carbon allowances:- Chicago Climate Exchange. European Climate Exchange. Nord Pool. Power Next. European Energy Exchange

Setting a Market Price For Carbon A. Introduction Emission levels are predicted to keep rising over time. Thus the number of companies needing to buy credits will increase. An individual allowance, such as a Kyoto (AAU) or its near-equivalent (EUA), may have a different market value . This is due to the lack of a developed secondary market for CERs. Carbon project under the Clean Development Mechanism are potentially limited in value because operators in the EU ETS.

B. University Economics Prof. William Nordhaus. The price of carbon needs to be high enough to motivate the changes in behavior and changes in economic production systems. It will provide signals to consumers about what goods and services are high-carbon ones. It will provide signals to producers. It will give market incentives for inventors and innovators to develop and introduce low-carbon products.

A high carbon price will economize on the information that is required to do all three of these tasks. A harmonized carbon tax would raise the price of a good proportionately to exactly the amount of CO2 that is emitted in all the stages of production . He has suggested, based on the social cost of carbon emissions, that an optimal price of carbon is around $30(US) per ton . The social cost of carbon is the additional damage caused by an additional ton of carbon emissions.

Buying Carbon Credits Can Reduce Emissions Carbon credits create a market for reducing greenhouse emissions by giving a monetary value to the cost of polluting the air. For example:- Consider a business that owns a factory putting out 100,000 tonnes of greenhouse gas emissions in a year. Its government is an Annex a country that enacts a law to limit the emissions that the business can produce. So the factory is given a quota of say 80,000 tonnes per year. The factory either reduces its emissions to 80,000 tonnes or is required to purchase carbon credits to offset the excess. After costing up alternatives the business may decide that it is uneconomical or infeasible to invest in new machinery for that year. Instead it may choose to buy carbon credits on the open market from organizations that have been approved as being able to sell legitimate carbon credits.

Consider the impact of manufacturing alternative energy sources. For example:- The energy consumed and the Carbon emitted in the manufacture and transportation of a large wind turbine would prohibit a credit being issued for a predetermined period of time. One seller might be a company. Another seller may have already invested in new low-emission machinery.

Credit V/s Taxes Credits were chosen by the signatories to the Kyoto Protocol as an alternative to Carbon taxes. The main advantages of a tradable carbon credit over a carbon tax are:- ,[object Object]

The flexible mechanisms of the Kyoto Protocol ensure that all investment goes into genuine sustainable carbon reduction schemes.

if correctly implemented a target level of emission reductions is achieved with certainty, while under a tax the actual emissions would vary over time.

it provides a framework for rewarding people or companies who plant trees or otherwise sequester carbon.,[object Object]

Advantage Of Carbon Tax ,[object Object]

perhaps some reduced risk of certain types of cheating, though under both credits and taxes, emissions must be verified.

reduced incentives for companies to delay efficiency improvements prior to the establishment of the baseline if credits are distributed in proportion to past emissions.

when credits are grandfathered, this puts new or growing companies at a disadvantage relative to more established companies.

It is clear what effect the policy has on the price of energy.,[object Object]

Carbon Credit

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