Carbon Credit-An Concept of Protecting Environment
A carbon credit is a generic term for any tradable certificate or permit representing the right to emit one tone of carbon dioxide or the mass of another greenhouse gas with a carbon dioxide equivalent (tCO2e) equivalent to one tone of carbon dioxide
Introduction:-
The burning of fossil fuels is a major source of greenhouse gas emissions, especially for power, cement, steel, textile, fertilizer and many other industries which rely on fossil fuels (coal, electricity derived from coal, natural gas and oil). The major greenhouse gases emitted by these industries are
carbon dioxide, methane, nitrous oxide, hydro fluorocarbons (HFCs), etc., all of which increase the atmosphere's ability to trap infrared energy and thus affect the climate.
The IPCC (Intergovernmental Panel on Climate Change) has observed that:
“Policies that provide a real or implicit price of carbon could create incentives for producers and consumers to significantly invest in low-GHG products, technologies and processes. Such policies could include economic instruments, government funding and regulation,”
while noting that a tradable permit system is one of the policy instruments that has been shown to be environmentally effective in the industrial sector, as long as there are reasonable levels of predictability over the initial allocation mechanism and long-term price.
The mechanism was formalized in the Kyoto Protocol, an international agreement between more than 170 countries, and the market mechanisms were agreed through the subsequent Marrakesh Accords. The mechanism adopted was similar to the successful US Acid Rain Program to reduce some industrial pollutants.
KOYOTO Protocol:-
The Kyoto Protocol is an international agreement linked to the United Nations Framework Convention on Climate Change, which commits its Parties by setting internationally binding emission reduction targets.
Recognizing that developed countries are principally responsible for the current high levels of GHG emissions in the atmosphere as a result of more than 150 years of industrial activity, the Protocol places a heavier burden on developed nations under the principle of "common but differentiated responsibilities."
The Kyoto Protocol was adopted in Kyoto, Japan, on 11 December 1997 and entered into force on 16 February 2005. The detailed rules for the implementation of the Protocol were adopted at COP 7 in Marrakesh, Morocco, in 2001, and are referred to as the "Marrakesh Accords." Its first commitment period started in 2008 and ended in 2012.
During the first commitment period, 37 industrialized countries and the European Community ( Annexure I Countries) committed to reduce GHG emissions to an average of five percent against 1990 levels. During the second commitment period, Parties committed to reduce GHG emissions by at least 18 percent below 1990 levels in the eight-year period from 2013 to 2020; however, the composition of Parties in the second commitment period is different from the first.
Trade of Carbon Credit:-
Carbon credits create a market for reducing greenhouse emissions by giving a monetary value to the cost of polluting the air. Emissions become an internal cost of doing business and are visible on the balance sheet alongside raw materials and other liabilities or assets.
For Example:-
Consider a business that owns a factory putting out 100,000 tones of greenhouse gas emissions in a year. Its government is an Annex I 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 tones per year. The factory either reduces its emissions to 80,000 tones 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.
What in Store For India:-
India Being an developing country exempted from the requirement of adherence to protocol. However it can sell the carbon credit to developed countries .Companies investing in windmills, Bio-Diesel, Co-Generation, Bio-Gas are the ones that will generate Carbon Credit for selling to the developed nations. Below is the table gives the name of some companies that get benefited from Carbon Credit scheme.
Sr. No.
|
Companies
|
Project
|
CERs (Units)
|
Estimated Amount Receivable(In CR)
|
1
|
Torrent Power AEC
|
Energy Efficiency
|
11900752
|
199.9
|
2
|
Gujarat Fluro Chemicals
|
Gas Captures
|
3380076
|
56.8
|
3
|
Indian Aluminum
|
Gas Captures
|
2553344
|
42.9
|
4
|
Lanco Group
|
Fuel Switching
|
2289478
|
38.5
|
5
|
Jaypee Associates
|
Energy Efficiency
|
1084469
|
18.2
|
6
|
Chennai Petroleum Refineries
|
Energy Efficiency
|
1010000
|
17
|
7
|
Balrampur Chini
|
Renewable
|
936289
|
15.7
|
8
|
Jindal Vijaynagar Steels
|
Energy Efficiency
|
575967
|
9.7
|
9
|
Orissa Sponge Iron
|
Energy Efficiency
|
424549
|
7.1
|
10
|
Kalpataru Power Transmission
|
Renewable
|
313743
|
5.3
|
11
|
Indo-Gulf Corporation
|
Energy Efficiency
|
245256
|
4.1
|
12
|
Grasim Industries
|
Energy Efficiency
|
242270
|
4.1
|
Conclusion:-
The greenhouse gas market has developed significantly over the past several years .From an theoretical construct proposed by politician and academician between early to mid 1990s, to an important part of Koyoto Protocol in 1997 to what is today an vibrant and active market that has seen in excess of 250 million tones of CO2 equivalent (tCO2eq) transected. Analysts have forecasted the global green house gas market range from US$ 10 billion to US$ 1 trillion.
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