With everyone speaking of Global warming, there exists a trade related to it and which has emerged effectively in last few years helping people, countries, consultants, traders, corporations and even farmers earn billions of rupees.Yes, we are speaking of Carbon credits which is emerging as a profitable trade all over the world.
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First we will check what is carbon credit.
ReplyDeleteAs a nation progresses more & more industries are set up, increasing emission of carbon, or gases which result in warming of the globe. Some decades ago a debate started on how to reduce the emission of harmful gases that contributes to the greenhouse effect that causes global warming. So, countries came together and signed an agreement named the Kyoto Protocol. The Kyoto Protocol is the mechanism under which countries that have been emitting more carbon and other gases (greenhouse gases include ozone, carbon dioxide, methane, nitrous oxide and even water vapour) have voluntarily decided that they will bring down the level of carbon they are emitting to the levels of early 1990s.
A company has two ways to reduce emissions.
1. it can reduce the GHG (greenhouse gases) by adopting new technology or improving upon the existing technology to attain the new norms for emission of gases.
2. it can tie up with developing nations and help them set up new technology that is eco-friendly, thereby helping developing country to 'earn' credits.
one credit is considered equivalent to one metric tonne of CO2 emissions. the credit is called as CER (Certified Emission Reductions).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. The European countries are the developed countries, Where as India, China and some other Asian countries are developing countries. Any company, factories or farm owner in India can get linked to United Nations Framework Convention on Climate Change and know the 'standard' level of carbon emission allowed for its outfit or activity. The extent to which one emits less carbon (as per standard fixed by UNFCCC) the one is credited. This is called carbon credit.
These credits are bought over by the companies of developed countries -- mostly Europeans -- because the United States has not signed the Kyoto Protocol.
Take an example, Assume that British Petroleum is running a plant in the United Kingdom. Say, that it is emitting more gases than the accepted norms of the UNFCCC. It can tie up with its own subsidiary in, say, India or China under the Clean Development Mechanism. It can buy the 'carbon credit' by making Indian or Chinese plant more eco-savvy with the help of technology transfer. It can tie up with any other company like Indian Oil or anybody else, in the open market.
In account of India there are almost 300-400 companies registered for UNFCCC norms to have carbon credits. The Indian government has not fixed any norms nor has it made it compulsory to reduce carbon emissions to a certain level. So, people who are coming to buy from Indians are actually financial investors. There is huge requirement of carbon credits in Europe. So to meet the norms of UNFCCC European companies buy the credits from Indian companies, which is the new way of attracting foreign exchange to India.
agree with above comment , i would also like to say that the developind countries should also should keep cap on their own carbon emission.
ReplyDeleteotherwise it will like countries the developing country will itself become victim of global warming.
so govt. should also constantly check ecology or carbon level of country.
so it will be a balance between atmosphere and and economy of country.
The Topic, "Carbon Credit-an emerging trade" shall be consider by different views, 1st one is Environmentally, Economically, Legally & Technologically.
ReplyDeleteA CC is the unit related to reduction of one tonne of CO2 emission from the baseline of Project activity.
Considering Environmental & Economical issue, it is helpful to reduce the Global warming. Developing nations can reap the benefits of this concept, under International Emissions Trading by selling the CC to Developed nations leading to further economical growth and infact CC can also be used to finance carbon reduction schmes between trading partners in a country or around the world.
For maintaining transperancy in CC trade, IET has established certain guidelines to sell & or Buy the CC. IET (International Emissions Trading) is an administrative approach to control pollution by providing Fiscal incentives to reduce emission.
Technologically, it is beneficial to developing nations as under IET, developed nations can exchange Technology with developing nations for getting CCs.
Another most important fact is that, the companies can buy and then sell CER (Carbon Emisssion Right)at Profit. But problem is that currenly there is no accounting standards or guidance for accounting CERs in India. Its required that Govt. must do work in this regard.
I do agree with agree with nikhils point of view that KYOTOPROTOCOL should be into action not only by the environmentalist but also by the government to reduce the emission of Industrial affluents (Carbon Dioxide, Methane)especally in the developing countries and the nations should need to echange the technical knowhow with the developing countries to bring down the level of carbon emission & reduce global warming.
ReplyDeleteFirstly let us understand what is carbon credit. A carbon credit is the unit related to reduction of one tonne of co2 emission from the baseline of the project activity. Carbon credits are the meant to provide a way to reduce greenhouse emissions on industrial scales by the capping of total annual emissions. the market assigns a money value to shortfalls, if any through trading. the credits can be exchanged between businesses or bought and sold internationally at the rates prevailing at the time the deal is made. They can also be used to finance carbon reduction schemes between trading partners in a country or around the world.
ReplyDeleteCarbon credits are generated by enterprises in developing world by using cleaner technologies and thereby, saving on energy consumption. This consequently reduces their greenhouse gas emissions. For each reduced ton of carbon dioxide emissions an organization receives a carbon emissions certificate which it can sell, either immediately or through a future market, just like any other commodity. the market for trading in carbon emissions is estimated to be in the range of $60 billion to $70 billion annually. India is one amongst the global leaders having already generated close to $30 million. Carbon credits and roughly another 140 million in the pipeline for sale making it one of the largest beneficiaries in the carbon credit trade. Now companies will be able to buy and sell carbon credits through an exchange in India.
http://www.assocham.org/prels/shownews.php?id=1938
ReplyDeleteThe article gives the trading rates of the CER's and the fall in the rates due to recession.
Carbon credit, is one of the good ans sensible approach made my government to control pollution by giving incentives for reduction in the emission of pollutants.
ReplyDeleteNow how its work?if Country A exceeds its capacity and Country B has a surplus of capacity, a monetary agreement could be made that would see Country A pay Country B for the right to use its surplus capacity. I MEAN, if a company’s carbon emissions fall below a set allowance, that company can sell the difference in the form of credits to other companies that exceed their limits.
Now, whats the advantage?? Reducing emissions and lowering energy consumption is usually good for the core business. company can do this by simple steps, like tightening valves, changing light bulbs, and improving operations efficiency, and many more.... thts how they can reduce the cost.