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Carbon Trading
Kyoto Protocol & India
Emission Trading |
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| Carbon
Trading |
Between 2008 and 2012, developed
countries have to reduce emissions of greenhouse gases to
an average of 5.2 per cent below the 1990 level under the
Kyoto Protocol. They can also buy CERs from developing countries,
which do not have any reduction obligations, in case their
industries are not in a position to lower the emission levels
themselves.
GFL is amongst India’s largest refrigerant gas manufacturing
company. In the course of manufacture of HCFC22 (a coolant
widely used in air-conditioning and refrigeration applications),
HFC23 is generated as a waste product, which is a potent greenhouse
gas, with a global warming potential equivalent to 11700 MT
of carbon dioxide.
As a part of GFL’s larger business plan to create a
sustainable future, it is one of the few companies in India
involved in Carbon Trading. Of the 15 projects approved by
the United Nations Framework of Climate Change Convention
(UNFCCC) so far, four are Indian and GFL is one of them. It
has today the technology in place to bring down the emission
levels of greenhouse gases and sell certified emission reduction
credits (CERs) to developed countries.
GFL is setting up a project for Greenhouse Gas Emission Reduction
by Thermal Oxidation of HFC 23, at Gujarat in India. This
project has been registered by the Executive Board of the
Clean Development Mechanism (CDM), established under the Kyoto
Protocol. Apart from being the largest project in India, it
is also the first Indian & third in the world to be registered
as a CDM.
GFL expects to generate more than 3 million tones of CERs
annually, which is expected to go up in the future as HCFC22
production grows. These CERs can be traded internationally
and can be used as a compliance tool under the Kyoto Protocol
as well as several other trading markets like the EU Emissions
Trading Scheme. Trade in compliance grade emission reductions
is expected to grow to € 10 billion per year by 2008,
according to industry estimates.
According to industry estimates, Indian companies are expected
to generate at least $8.5 billion at the going rate of $10
per ton of CER. By 2007, when actual trading will start, the
cost of a ton of CER is estimated to rise to $45, said officials
in the ministry of environment and forests. |
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| Kyoto
Protocol & India |
The Kyoto Protocol, which came
into effect in September 2005, places legally binding caps
on greenhouse gas emissions by industry in developed countries.
The Clean Development Mechanism (CDM) is a flexible mechanism
recognized under the Kyoto Protocol, which enables an entity
in a developing country like India, to effect greenhouse gas
emission reductions, have them verified through recognized
and accredited Operating Entities, and sell the ‘Certified
Emission Reductions’ so achieved, in the developed world,
to be used as a compliance tool. The rationale of this flexible
mechanism is that bringing about greenhouse gas emission reductions
in developing countries is more cost effective than doing
so in developed countries.
Quick Facts:
According to World Bank estimates, India is expected to rake
in $100 million annually by trading in carbon credits and
Indian companies are expected to corner at least 10 per cent
of the global market in the initial years.
Globally, greenhouse gas emissions are expected to come down
by 2.5 billion tonnes by 2012. According to industry estimates,
Indian companies are expected to generate at least $8.5 billion
at the going rate of $10 per tonne of CER.
By 2007, when actual trading will start, the cost of a tonne
of CER was estimated to rise to $45, said officials in the
ministry of environment and forests.
India is the world’s sixth largest emitter of carbon
dioxide with its present share in global emissions estimated
at 6 per cent. |
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| Emission
Trading |
Emissions trading is an administrative
approach used to reduce air pollution by providing economic
incentives for reducing net emissions. In such a plan, a central
authority (i.e air pollution control district, state agency,
or Federal agency) sets limits or "caps" on each
pollutant. Groups that intend to exceed the limits may buy
emissions credits from entities which are able to stay below
their designated limits. This transfer is normally referred
to as a trade.
The Kyoto Protocol will bind ratifying nations to a similar
system, with the UNFCCC setting caps for each nation. Under
the proposed treaty, nations that emit less than their quota
of greenhouse gases will be able to sell emissions credits
to polluting nations.
In private enterprise, emissions trading is very attractive
because it does not harm industrial concerns, or require government
subsidies. When the price per ton of emissions becomes high
enough, well-managed polluting enterprises can make a rational
decision to invest in pollution control equipment, and sell
part of their emissions licenses. |
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