Carbon Credits in India

Our earth  is undoubtedly warming.  This warming  is  largely  the  result  of  emissions of carbon  dioxide  and  other Greenhouse  Gases (GHG’s) from human activities including industrial processes, fossil fuel combustion, and changes in land  use,  such  as  deforestation  etc. Addressing climate  change  is  not  a  simple  task. To  protect ourselves,  our  economy,  and  our  land  from  the adverse effects of climate change, we must reduce emissions of carbon dioxide and other greenhouse gases.  To achieve this goal the concept of Clean Development Mechanism  (CDM) has come  into vogue as a part of Kyoto Protocol. The  objective  is  the  “stabilization  of greenhouse gas concentrations in the atmosphere at  a  level  that  would  prevent  dangerous anthropogenic  interference  with  the  climate.

Kyoto  Protocol is  an  agreement made under the United Nations Framework Convention on Climate Change  (UNFCCC).  The  treaty was negotiated  in Kyoto,  Japan  in December  1997, opened for signature on March 16, 1998, and closed on March  15,  1999.  The  agreement  came  into force  on  February  16,  2005,  under which  the industrial ised  countries  wi l l  reduce  their collective emissions of greenhouse gases by 5.2% compared to the year 1990 (but note that, compared to the emissions levels that would be expected by 2010 without the Protocol, this target represents a 29% cut). The aim is to lower overall emissions of six greenhouse gases - carbon dioxide, methane, nitrous oxide, sulfur hexafluoride, HFCs(Hydrofluro Carbon), and PFCs - calculated as an average over the  five-year period of 2008-12. National  targets range from 8% reductions for the European Union and some others to 7% for the US, 6% for Japan, 0%  for Russia, and permitted  increase of 8%  for Australia and 10% for Iceland.

The  Clean  Development Mechanism (CDM) is an arrangement under the Kyoto Protocol al lowing  industrial ized  countries  with  a greenhouse gas  reduction  commitment  to  invest in  emission  reducing  projects  in  developing countries  as  an  alternative  to what  is  generally considered more  costly  emission  reductions  in their  own  countries. Under  CDM,  a  developed country can take up a greenhouse gas reduction project activity in a developing country where the cost of GHG reduction project activities is usually much lower. The developed country would be given credits  (Carbon Credits)  for meeting  its emission reduction  targets, while  the  developing  country would receive the capital and clean technology to implement the project. Carbon credits are  certificates  issued  to countries  that  reduce  their  emission  of  GHG (greenhouse gases) which causes global warming. Carbon credits are measured in units of certified emission  reductions  (CERs) .  Each  CER  is equivalent to one tonne of carbon dioxide reduction. Its rate stood at 22 Euros in April, fell to below 7 Euros, before stabilizing at 12-13 Euros. Under IET (International  Emissions  Trading) mechanism, countries  can  trade  in  the  international  carbon credit market. Countries with surplus credits can sel l  the  same  to  countries  with  quantified emission  limitation  and  reduction  commitments under the Kyoto Protocol. Developed countries that have  exceeded  the  levels  can  either  cut  down emissions, or borrow or buy carbon credits  from developing countries. The UNFCCC  divides  countries  into  two main groups: A total of 41 industrialized countries are currently listed in the Convention’s Annex-I , including  the  relatively wealthy  industrialized countries that were members of the Organization for  Economic  Co-operation  and  Development (OECD)  in 1992, plus countries with economies in  transition (EITs),  including  the  Russian Federation, the Baltic States, and several Central and Eastern European States. The OECD members of  Annex-I  (not  the EITs)  are  also  listed  in  the Convention’s  Annex-II .  There  are  currently  24 such  Annex-II  Parties.  All  other  countries  not listed  in  the Convention’s  Annexes, mostly  the developing countries, are known as non-Annex-I countries. They currently number 145.