CARBON CREDITS
What are
Carbon Credits?
 In 1997, in Kyoto, developed Industrialised
countries pledged to reduce the production of greenhouse gases which contribute
to Global warming by a minimum of 5% by 2012, compared to a 1990 baseline. The
Greenhouse Gases which include Carbon-di-oxide, Methane and also other oxides on
account of incomplete combustion, substantially disturb the balance of the heat
in the earth’s atmosphere leading to warming of the atmospheric temperature
which is called as Global Warming and is considered a major threat to life on
earth.
How does Global
warming occur:
 Carbon is an element stored in fossil fuels
such as coal and oil. When these fuels are burned, carbon dioxide is released
and acts as what we term a "greenhouse gas". Similarly, oxides of Carbon and
Nitrogen which are released on account of Incomplete combustion also are
Green-house gases. Methane or Natural gas liberated is also a green house Gas.
These Green house gases which are liberated
in the atmosphere form a blank over the earth surface thus trapping and
preventing the heat from escaping the earth’s surface, thus resulting in
increasing the temperature of the Earth, a process termed as Global Warming.
The effects of Global warming are well
known to humans, including ill effects on all living species of plants and
animals and giving rise to the threat of melting of ice bergs in the Sea,
which can raise the sea levels in dangerous proportions resulting in flooding.
While there are several other green house
gases, it is pragmatic to consider the scope of elimination of the green house
gases which are within the scope of human efforts.
Understanding the precarious situation due to Global warming, the
carbon trade
came about in response to the Kyoto Protocol. Signed in Kyoto, Japan, by some
180 countries in December 1997, the Kyoto Protocol calls for around 38
industrialized countries to reduce their greenhouse gas emissions between the
years 2008 to 2012 to levels that are 5.2% lower than those of 1990.
 Thus the developed countries set themselves a
target to reduce the Greenhouse gas emissions by employing measures to reduce
the green house gases in their inhouse production units. However, since it is
not possible to scrap the production units, the countries pledged to maintain
the balance of the green house gas emissions by encouraging the third world
countries to put up measures to reduce the green house gases either by
decreasing their emissions or by encouraging measures of reducing the green
house gases such as setting up Projects which encourage the use of alternate
energy which reduce carbon emissions including promotion of Pollution reducing
Products and Projects involving plantation of trees which absorb carbon-di-oxide
such as Jatropha plants yielding Bio-diesel seeds and other such Bio-fuel crops.
Thus Companies that consume fuels for their
Energy requirements such as in Boilers and Furnaces and Power stations or
industrial Generators that reduce emissions by more than they are required to,
can acquire full advantage of their efforts and earn appreciation by way of
earning Carbon-credits which they can sell to other power stations or industrial
units that have not met their target.
What are carbon
credits?
Carbon credits are reductions of emissions of
greenhouse gases caused by a project or a Product utilized by anybody which
directly or indirectly reduces or eliminates green house gases. Currently this
reduction is measured in terms of Carbon-di-oxide reduced. Thus One carbon
credit is equivalent to One ton reduction of Carbon-di-oxide.
Now Carbon Credits can be obtained by
undertaking new projects under Joint Implementation(JI) with funding agencies or
through usage of Products or Projects under Clean Development Mechanism(CDM).
In JI, carbon credits are officially called Emission Reduction Units or ERUs. In
the CDM, they are called Certified Emission Reductions or CERs. CO2e is the
same as a carbon credit, ERU or CER.
Benefits of
Carbon Credits:
(1) provide an additional source of
revenue
(2) improve the return on investments
in Projects
(3) boost the economic feasibility of
projects
(4) accelerate project implementation
(5) contribution towards the fight
against Global warming.
How do Carbon
Credits work?
Companies in countries buy the emission
reduction achieved (carbon credits) that are realized through investment in JI
or through CDMs and that otherwise would not have existed. Prices are realised
by process of competitive bidding.
What kind of investment
projects result in carbon credits?
Carbon credits may be generated from
Investments and Projects in renewable energy, energy efficiency, fuel switch and
waste management projects.
CDM Projects and
Products:
 Some of the fields where Carbon Credits or
CER can be generated through implementation of CDM Projects:
Energy
Supply: Renewable
energy (e.g. wind mills) - biomass (heat and/or power) and cogeneration.
Fuel switch:
Switching the fuel for Boilers,
Furnaces or Power Plants from Coal or Conventional fuel Oils to biomass or
Eco-friendly fuels)
Energy demand:
Replacement of existing electrical equipment with more efficient units and
improvement of energy efficiency of existing production equipment.
Transport: Using more
efficient engines for transport (e.g. replacing old diesel trains by modern
diesel trains) or through transport model shift (e.g. from plane to train) and
fuel switch (e.g. public transport buses fuelled by natural gas or Bio-fuels)
Waste management:
Capture of landfill methane emissions & utilisation of waste and wastewater
emissions.
Domestic Utilities:
Improving energy efficiency by replacing existing equipment and installing new
efficient, new water pumps etc.
Forestry:
Afforestation & Reforestation or Plantation of Eco-friendly plants.
Carbon capture and
storage (CCS): This Technology allow emissions of carbon dioxide
to be
'captured' and
'stored'
– preventing them from entering the atmosphere. CCS presents one of the most
promising options for large-scale reductions in CO2 emissions from energy use.
CO2
capture is possible from
fossil
fuel power stations or from other large CO2 sources, such as the chemical,
steel
or cement
industries, Power Projects or from natural gas production. CO2 can be
stored
in geological formations such as saline aquifers or expired oil and gas
reservoirs or specially developed storages.
Procedure for Obtaining
Carbon Credits
Before you can sell carbon credits you first
of all, look into areas where you can reduce emissions and be eco-friendly,
then identify and plan a suitable CDM project and determine how much your
project reduces emissions. Prior to this you define a baseline, which is a
scenario in which you provide supporting evidence about what the emission of
greenhouse gases would be until 2012 without your investment. You compare this
baseline with the lower emission that will be achieved through your investment.
The difference between them is the amount of saleable carbon credits.
In the case of JI projects you can only sell
the reduction achieved between 2008 and 2012 and not what you achieved in the
previous years or years after.
Certification requirements:
A validation or certification organisation,
acting as an independent third party, validates the baseline you have drawn up.
This organisation must work according to the "Accreditation Guidelines on the
Application of EN 45004 (ISO/IEC Guide 17020) for the Validation and
Verification of JI projects" or according to the guidelines of the UNFCCC
Executive Board
Accreditation Panel for CDM projects.
The host country's government must give
approval for the transaction in carbon credits through a Letter of Approval.
However, even if there is a MOU with the country in which you want to invest,
you will have to obtain this letter from this country's government yourself or
through an Accreditated Agency.
The payback mechanism under the Kyoto
Protocol is a system called carbon credits that are traded like stocks and
bonds. The ones who are selling are companies that use clean technology and
those doing the buying are the world's polluters like the Industries, Power
Plants, Aviation and the energy sector.
A company that wants to earn from reducing
green house gas emissions can get itself certified from the Indian government
and the UN body monitoring climate change.
Then it can sell the credit it earns from
reducing emissions to another company that's failed to achieve the Kyoto target
or to a company that trades using the generated Carbon Credits. Thus the idea
behind carbon trading is quite similar to the trading of
securities or
commodities in a
marketplace. Carbon is given an economic value, allowing companies, agencies or
governments to buy, sell, bank and trade Carbon Credits called Certified
Emission Reductions or CERs.
How Much
will Carbon Credit fetch?
One carbon credit or CER equals one tonne of
emission reduced. Currently though the market value of a single carbon credit
is around USD 27, the purchase can actually happen around USD 10 per CER.
Now even if the cost of locking away a tonne
of carbon is between US$10 and $15 a tonne depending on the type of product or
technology used, it offers a margin of 5USD per Carbon Credit or CER. Assuming
the economies of scale, this becomes an attractive model for Industries, Power
plants and Consumers alike to gain additional income or reduce costs in the
process of meeting their commitments towards controlling pollution and joining
the drive to be Eco-friendly.
Many Indian companies and also those in other
developing countries must thus soon realize that there's money to be made by
becoming eco-friendly. They should rapidly turn to Clean Technologies and should
begin trading their carbon credits with companies in the US and the European
Union.
Mpower in
Carbon Credits
Guided by encouraging results of its Clean
Technologies, Mpower is also poised to be a Carbon trading platform with the
various exchanges engaged in Carbon credits. Mpower firstly provides step-wise
consultation to its customers and after establishing the above said procedures
for obtaining carbon credits on behalf of its clients, Aggregates and sells the
Carbon Credits. To facilitate its knowledge and experience to a wider market,
Mpower also buys and sells Carbon Credits or CER’s to provide a single stop
solution for the Carbon Credit business.
Mpower thus provides complete range of
services to its customers or anyone with commitment towards fighting Global
warming, to Identify, Plan and Implement the above enlisted CDM Projects or help
its customers use Eco-friendly Fuels and generate Energy that earn Carbon
Credits.
In this manner, Mpower is not only making
its own contribution towards the world-wide fight against Global warming but
also supports and encourages people and organizations to join the drive towards
usage of Environmentally friendly Fuels and Technologies that combat Global
warming.
For additional enquiry or any further
knowledge on this subject, please write specifying your interests, background
and details to:
projects@mpowerfuels.com
|
