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ContentsContents
Reason of Climate change and its effectReason of Climate change and its effect
Factor contribution to Co2Factor contribution to Co2
What is Carbon tradingWhat is Carbon trading
I
II
III
Carbon Credit & Its TradingCarbon Credit & Its Trading
UNFCCC & Kyoto ProtocolUNFCCC & Kyoto ProtocolIV
Kyoto MechanismKyoto MechanismV
Type of Carbon TradingType of Carbon TradingVI
EPGDIB 2010-12 - Group VI
Meharban Singh - 25
Praveen Nambiar - 35
Sanjay Chowdhury - 54
Sheikh Abdul Hamid - 59
Suhita Singh - 64
Viranchi Rastogi - 70
Carbon trading processCarbon trading processVII
Opportunity for Indian companiesOpportunity for Indian companiesIX
Development in IndiaDevelopment in IndiaVIII
Commodity Price Risk ManagementCommodity Price Risk Management
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CPRMWhat are Reasons for Climate change & Its effects
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CPRMContribution to Co2 ! Source
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CPRM
Carbon credits is an element used to aid in regulation of the
amount of gases that are being released into the air. This is part of
a larger international plan which has been created in an effort to
reduce global warming and its effects.
The plan works by capping the amount of total emissions that
can be released by one company or business.
Carbon Credit
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If there is a shortfall in the amount of gases that are used, there is
a monetary value assigned to this shortfall and it may be traded.
These credits are often traded between businesses.
However, they also are bought and sold in international markets atwhatever market value is determined for them.
Sometimes these credits are used to fund carbon reduction plans
between trading partners
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CPRM
1 ton of CO2 or its equivalent greenhouse gas
(GHG) which is an entitled certificate by
UNFCCC.
What is Carbon Credit
1 Carbon Credit
UNFCC : United Nations Framework Conventionon Climate ChangeS. No Greenhouse Gas Global Warming Potential(GWP)
1 Carbon Dioxide 1
2 Methane 21
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4 Hydrofluoro Carbons 140-1170
5 Perfluoro carbons 6500-9200
6 Sulphur Hexafluoride 23900
There are two types of market in carbon credit:
- Compliance Market (Annexure I countries)
- Voluntary Market (Non- Annexure countries)
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CPRMTypes Of Market In Carbon Credit
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CPRM
Act signed by 165 nations in 1992 at Rio de Janeiro.
Annex 1 & Non-Annex 1 countries.
Annex 1 (developed countries) agreed to reduce their GHGs by 5.2%st
What is UNFCCC
United Nations Framework Convention on Climate Change
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.
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CPRMINDIA AND KYOTO PROTOCOL
India signed and ratified the Protocol in August, 2002
Since India is exempted from the framework of the treaty, it is
expected to gain from the protocol in terms of transfer of
technology and related foreign investments
India maintains that the major responsibility of curbing
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,
accumulated emissions over a long period of time.
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CPRMKYOTO Protocol
Annex I
Austria
Belgium
Monaco
Canada
Netherland
New Zealand
Non -Annex-B
India
Bangladesh
Brazil
China
Afghanistan
Algeria
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United Kingdom
Germany
Spain
SwitzerlandGreece
Nepal
Argentina
Bolivia
Sri Lanka
PakistanMalaysia
Mauritius
Participation in the Kyoto Protocol, where green indicates countries that have signed and ratified the treaty (Annex Iare in dark green), grey is not yet decided, and brown is no intention of ratifying.
Annex I
Non-Annex -B
Not ratified
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CPRMKYOTO /EMISSION REDUCTION MECHANISM
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CPRM
IDENTIFICATION OF PROJECT AND
DEVELOPMENT OF PROJECT CONCEPT NOTE
DEVELOPMENT OF PROJECT DESIGN
DOCUMENT
APPROVAL BY NATIONAL CDM AUTHORITY OF
HOST COUNTRY
CDM PROCESS
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VALIDATION
REGISTRATION
CERTICATION
VERIFICATION
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CPRMCARBON TRADING
A carbon trading system allows the development of a market
through which carbon dioxide or carbon equivalents can be traded
between participants, whether countries or companies. Each carbon
credit is equal to 1 metric tons of carbon dioxide, which can betraded or exchanged in market.
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There are two kinds of carbon trading Emission trading andtrading in Project-based Credits. The two categories are put
together as Hybrid trading System
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CPRMTYPES OF CARBON TRADING
1. EMISSION TRADING:
A company can reduce its emission by half the cost of allowance bought from
other company
On the other hand, a company with higher expenditure for reduction of i ts
emissions buys the required allowance from other company to save i tsemission cost
2. PROJECT-BASED TRADING:
Government & World Bank subsidized credit for ro ect-based tradin to the
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companies calculating how much carbon dioxide equivalent theysave/reduces
Project-based Credit trading includes baseline-and-credit t rading and
offset trading
3. HYBRID TRADING SYSTEM:
In Hybrid trading system, both emission trading and offset trading are used
and try to make allowance exchangeable for project-based credits.
Hybrid trading system is enormously complex as it is not only difficult to try
to create credible credit and make them equivalent to allowance15
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CPRMCarbon Network
Seller
Banks
Individuals
Buyers
Annex 1country
Banks
Exchange
Trading
exchange
Banks
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Consultants
Annex 2 & 3
countries
Others
Individuals
Consultants
Others
NGO &
Government
Brokers &
Traders
Intermediary
serviceproviders
Consultants
NGO &Govt.
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CPRMParties Involved in Carbon Trading
PROJECT ENTITY: Joint venture company or a limited partnership thatare set up specifically to undertake the project
SPONSOR: Individuals/companies/entities that support a project who
have a direct or indirect interest in the project.
LENDER: If the project is financed through debt, one or more banks may
be lenders.
EQUITY PROVIDER:Equity may be provided by project sponsors or third
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party investors who ensure that the project produces a ROI as set out inthe business plan.
CONSTRUCTOR:Who have responsibility for the completion of the works,
& often have to assume liability for finishing construction on time and to
budget.
OPERATOR:Person responsible for the operation and maintenance of the
project facilities once completed
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CPRM
SUPPLIER
BUYER
INSURER:If a risk is to be mitigated by purchasing insurance, the lender
will need to be satisfied as to the track record and credit-worthiness of
the insurer.
RATING AGENCIES: The rating agencies may be involved if the
financing of the project involves the issue of securities
Parties Involved in Carbon Trading
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EXPERTS: Experts are individuals who give advise on key technical,engineering, environmental and risk aspects of a project.
HOST GOVERNMENT:The role of the host government varies but may
involve economic, social , environmental guidel ines & issuance of
relevant consents, permits & licenses
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CPRM
New cash source to companies who are able to maintain their
emission levels well within the permissible limits.
The overall ecological balance is preserved
The company or country gets rewarded for applying clean
technology in its production process.
Advantages of Carbon Trading
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muc e er corpora e an soc a mage w c w ns pu c
approval
Encourages activities like tree plantings which would help reduce
soil salinity, improve water quality and enhance biodiversity
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CPRM
Supply-demand mismatch
Crude oil prices
CO2 emissions
Foreign exchange
fluctuations
Price Influencing Factors
Policy issues
Coal prices
European Union Allowances(EUAs) prices
Global economic growth
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Key Risks and Uncertainties
The extent to which the Kyoto Protocol guidelines are
implemented & followed
The attitude of US which is the biggest polluter and had refusedto sign the treaty
The final rules and decisions relating to an emissions trading
market
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CPRMPosition of India
India is considered as the largestbeneficiary, claiming about 31 % of
the total world carbon trade through
CDM It is expected to rake in at least Rs
22,500 crore to Rs 45,000 crore over
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are expected to corner at least 10 per
cent of the global market in the initial
year
If India can capture a 10% share ofthe global CDM market, annual CER
revenues to the country could range
from US$ 10 million to 300 million
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CPRMCarbon Trading at MCX
The Multi Commodity Exchange of India Ltd entered into analliance with the Chicago Climate Exchange in 2005 to introduce
carbon credit trading in India
MCX is the futures exchange. 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
The Indian government has not fixed any norms nor has it made it
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compulsory to reduce carbon emissions to a certain level. So,people who are coming to buy are actually financial investors
Trading Benefits
Sellers and intermediaries can hedge against price risk
Advance selling could help project to generate liquidity and therebyreducing its cost of implementation
There is no counter party risk as exchange guarantee the trade
The price discovery on the exchange platform ensure the fair pricefor both the sellers and buyers
Bring players to a single platform 22
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CPRM
Andhyodaya Green Energy
Grasim Industries Ltd.
Indo Gulf Fertilizers
Indus Technical & Financial
Consultants Ltd
Madh a Pradesh Rural
Reliance Energy Ltd.
Tata Motors Limited
Tata Steel Limited
Bajaj Finserv Limited
Dhariwal Industries Ltd
Tata Power Com any Limited
Carbon Credit Traders in India
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Livelihoods Project
Rajasthan Renewable
Energy Corporation
BlueStar Energy Services Inc.
Valera Global Inc.
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CPRMOutlook For India & Companies : Taking Advantage
India is one of the exempted from this protocol as they are statedas developing countries, but overseas companies can buy carbon
credits from these countries.
Now companies in India can use Carbon credits to get liberal
loans, incentives by multinationals in their countries and benefits
like better social and ecological visibility
Examples
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Gujarat Fluoro Chemicals is amongst first companies worldwide toget its carbon emission reduction project certified. It is set to reap
rewards from the sale of CER credits from this year itself
Tata Steel is believed to have signed a MoU with the Japanese
government agency NEDO for sale of credits accruing to it from
carbon reduction following the implementation of an over Rs 250
crore modernization and upgradation project
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CPRMIndian Companies : Taking Advantage
NTPC and several state electricity boards have also applied for
carbon credit benefits. Most of them are replacing coal-based
technologies with more environment-friendly processes
Of the 15 projects approved by the UNFCCC so far, four areIndian. These four are:
Gujarat Flurochemicals,
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,
The Clarion power project in Rajasthan and
The Dehar power project in Himachal Pradesh
The country accounted for 283 CDM projects out of the 819
registered by the CDM Executive Board, the environmentministry, the World Bank and the International Emissions Trading
Association
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CPRMConclusion
There is a great opportunity awaiting for India in carbon tradingwhich is estimated to go up to $100 billion by 2010
In the new regime, the country could emerge as one of the largest
beneficiaries accounting for 25 % of the total world carbon trade,
says a recent World Bank report
Analysts claim if more companies absorb clean technologies, total
CERs with India could touch 500 million.
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Of the 391 projects sanctioned, the UNFCCC has registered 114from India, the highest for any country.
There are projects range from cement, steel, biomass power, bio-
gases co-generation and municipal solid waste to energy,
municipal water pumping and natural gas power. The ministry has
given the host-country clearance, the CDM projects will have to
be approved by the executive board of the UNFCCC
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CPRMExchange Rates
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CPRMCarbon fund
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CPRMSummary .
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Action toward saving Earth .