ENVIRONMENTAL ISSUES IN

MANAGEMENTJITHIN KRISHNAN

S1 MBASMBS

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JAYARAJ’S Global Warming and Climate

Change Deforestation Energy Crisis Ozone Layer Depletion Pollution Waste Oil Spills Overpopulation Nuclear Issues

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WE ARE GOING TO TALK ABOUT: ACID RAIIN Carbon Credit Definition UNFCC KYOTO PROTOCOL Carbon credit(s)

Mechanism Pricing Avenues for Earning Importance Indian Scenario

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ACID RAIN

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WHAT IS ACID RAIN? Refers to what scientists call acid deposition. Caused by airborne acidic pollutants and has

highly destructive results. One of the most important environmental

problems of all, cannot be seen. The invisible gases that cause acid rain usually come from automobiles or coal-burning power plants.

Moves easily, affecting locations far beyond those that let out the pollution.

Can have harmful effects on plants, aquatic animals, and infrastructure through the process of wet deposition.

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CARBON CREDITS A carbon credit is a financial instrument

that represents a tonne of CO2 or CO2e (carbon dioxide equivalent gases) removed or reduced from the atmosphere from an emission reduction project.

Carbon credits are measured in units of certified emission reductions (CERs).

Each CER is equivalent to one ton of carbon dioxide reduction.

Such a credit can be sold in the international market at a prevailing market rate.

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CARBON CREDITS

1 CARBON CREDIT ≈ 1 ton of CO2 or its equivalent greenhouse gas (GHG) which is an entitled certificate by UNFCCC (United Nations Framework Convention on Climate Change)

WHAT IS CARBON CREDIT UNDER THE KYOTO PROTOCOL…

A credit for reducing 1 ton of CO2 (Green

House Gases) from the atmosphere

Allowance to generate 1 tonne

of C02 (GHG’s)

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HOW 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. Emissions become an internal cost of doing business and are visible on the balance sheet alongside raw materials and other liabilities or assets.

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Birth of UNFCCC

In 1992, Rio Brazil

Objective…Green House Gases should be stabilized within a time frame.

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UN FRAMEWORK CONVENTION ON CLIMATE CHANGE(UNFCC)

165 nations signed the 1992 United Nations Framework Convention on Climate Change (UNFCCC) at Rio de Janeiro

The Convention divides countries into two main groups - Annex I & Non-Annex I Countries

Annex I (developed countries) agreed to reduce their GHGs by 5.2 % below 1990 levels in 1st commitment period 2008 – 2012

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UNFCC Convention is based on three principles

– Common but differentiated responsibility– Precautionary approach– Sustainable Economic Growth and Development

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The KYOTO PROTOCOL…

An agreement negotiated in 11 December 1997 in

Kyoto, Japan

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The Kyoto Protocol……

Objective

Reduction of Green House Gases emission by developed

countries in theThe First Commitment Period

(2008-2012)

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WHAT IS KYOTO PROTOCOL? The Kyoto Protocol is an international agreement

linked to the United Nations Framework Convention on Climate Change(UNFCCC) passed on 11 December 1997 in Kyoto, Japan but came in force on 16 February, 2005.

Countries that ratify this protocol commit to reduce

(a) their emissions of carbon dioxide and

(b) five other greenhouse gases, or

(c)engage in emissions trading if they maintain or increase emissions of these gases.

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FEATURES OF KYOTO PROTOCOL It sets legally binding targets for

emissions of 6 major greenhouse gases in industrialized countries and defines a specific time period for reaching those targets.

It creates a new commodity (carbon) that can be traded through new international market-based mechanisms.

It will facilitate the initials of sustainable development while providing additional support to developing nations to achieve this goal.

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KYOTO Protocol

Annex INon-Annex I

Not ratified

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Non -Annex-1

IndiaBangladeshBrazilChinaAfghanistanAlgeriaNepalArgentinaBoliviaSrilankaPakistanMalaysiaMauritius

Annex I

Australia(Not ratified)AustriaBelgiumMonacoCanadaNetherlandNew ZealandUnited KingdomGermanySpainSwitzerlandGreece

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MECHANISMS UNDER THE PROTOCOL Clean Development Mechanism

(CDM) Joint Implementation Emissions Trading

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Clean Development Mechanism (CDM)

Developed

country (needs

CC)

Developing

Country

Earns carbon credits called

Certified Emission Reduction

Sells carbon credits

Sets a project

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Joint Implementation

Developed

country A

(needs CC)

Developed

country B

Sets a project

Earns carbon credits called

Emission Reduction

Units

Sell carbon credits

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Emission Trading

Developed

country A

(needs CC)

Developed

country B

Earns carbon credits called

Assigned Amount Units

Sell these carbon credits

Payment for CC

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MARKET FOR CARBON TRADING……

Currently there are 5 Environmental Exchanges, trading in Carbon Credits

POWER NEXT

EUROPEAN CLIMATE EXCHANGE

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KEY PRICE DETERMINANTS Risk allocation Creditworthiness & experience of project

sponsor Viability of underlying project Contract structure (e.g. upfront payments

incur discount, penalties for non-delivery, ability to pay penalties)

Cost of validation & potential certification Host country support & willingness to

cooperate Additional environment and social benefits

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CE TRADING – MARKET TRENDS The amount of carbon dioxide equivalent

(CO2e) being traded globally in 2009 would value at USD 157 billion.

The global carbon market that has been growing by 105 per cent and 84 per cent in 2007 and 2008 respectively.

India is expected to be one of the top three largest players in the Carbon Credits market by 2010 end where business is estimated to grow by US$ 5 billion.

The average annual Certified Emission Reduction (CERs) from registered projects during July 2008 to February 2009 grew by 20.92 per cent from 218,345,930 to 264,022,976 respectively.

$ 60 Billion was the size of the global carbon credit market in 2007.

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CE TRADING – MARKET TRENDS The average price paid to offset one ton of CO2

or equivalent GHGs rose 49% from 2006 to 2007.

The percentage of projects sourced from Asia nearly doubled, from 22% in 2006 to 39% in 2007.

More than 3.6 million CER’s registered. Of the 93 CDM projects registered, 23 are from

India. Almost 50% of projects in the pipeline are from

India. Over 75% of India’s CDM potential lies in the

energy sector. By 2012 Indian companies are expected to

generate at least US$ 8.5 billion

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India’s Stance in Carbon Credits

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India along with China, lead countries in earning Carbon

Credit

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India pocketed Rs 1,500 crores in the year 2005 just by selling carbon credits to developed- country clients.

India has generated 30 millionCarbon credits & 140 million are in pipeline

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CDM MARKET IN INDIA Fastest growing financial market – rose 80% in

2007 to reach nearly $ 60 billion - expected to be $ 1 trillion by 2009–10.

2007 carbon market shows China’s share at 61% and India at 12%. In terms of total CERs issued of 166 million, India has 43 million or 26%.

In 2008, China’s share at 23% and India at 30% in terms of no of projects and 36% and 25% in terms of no of CER’s issued respectively. (13.10.08)

An Indian firm, J.S.W Steel won the largest single CER of 5.4 million in 2 projects.

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CDM POTENTIAL FOR INDIA

29%

1%5%

6%

2%

35%

22%

No. of Projects

Energy Efficiency Forestry Fuel switching Industrial Process MSW Renewable Renewable (Biomass)

• Sector-wise break-up

Total No. of Projects = 1578

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34%

2%

10%

18%

2%

20%

14%

CERs up to 2012

Energy Efficiency Forestry Fuel switching Industrial Process MSW Renewable Renewable (Biomass)

Total No. of CERs = 633401547.39

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CARBON TRADING IN INDIA Multi Commodity Exchange of India Ltd. ( MCX)

entered into a strategic alliance with CCX in September 2005 to initiate carbon trading in India.

The tie-up would provide immense scope and opportunity for domestic suppliers to realize better prices for their carbon credits.

India being a major supplier of carbon credits, the tie-up between the two exchanges is expected to ensure better price discovery of carbon credits

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SOME OF THE LEADING COMPANIES OF INDIA USING & SELLING CARBON

CREDITS…

GUJARAT FLOUROCARBONS Ltd.

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CARBON CREDIT TRADERS IN INDIA Andhyodaya Green

Energy Grasim Industries Ltd. Indo Gulf Fertilizers Indus Technical &

Financial Consultants Ltd

Madhya Pradesh Rural Livelihoods Project

Rajasthan Renewable Energy Corporation

Reliance Energy Ltd. Tata Motors Limited Tata Steel Limited Bajaj Finserv Limited  Dhariwal Industries Ltd Tata Power Company

Limited BlueStar Energy

Services Inc. Valera Global Inc.

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CONCLUSION CC provide an additional source of

revenue; CC improves the return on their

investments; CC boost the economic feasibility of

projects; CC accelerate project implementation.

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THANK YOU

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