The Scope Of Carbon Trading In India Environmental Sciences Essay

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The Scope Of Carbon Trading In India Environmental Sciences Essay

Carbon Trading: Carbon trading is a practice which is designed to reduce general emissions of carbon dioxide, along with other greenhouse gases, by providing a regulatory and economical incentive. In fact, the term “carbon trading” is a lttle bit misleading, as several greenhouse emissions could be regulated under what exactly are referred to as cap and trade systems. Because of this, some people choose the term “emission trading,” to emphasize the actual fact that far more than simply carbon has been traded.

This practice is part of something which is colloquially known as a “cap and trade.” Under a cap and trade system, a government sets a national goal for total greenhouse gas emissions over a place period of time, like a quarter or a time, and allocates “credits” to corporations which permit them to emit a specific amount of greenhouse gases. If a enterprise is unable to use all of its credits, it can sell off or trade those credits with a enterprise which is afraid of exceeding its allowance.

Carbon trading offers a very clear incentive for companies to improve their efficiency and decrease their greenhouse gas emissions, by turning such reductions into a physical cash benefit. In addition, this can be a disincentive for being inefficient, as corporations are efficiently penalized for failing woefully to meet emissions goals. In this way, regulation is accomplished mainly through economic means, instead of through draconian government methods, encouraging people to engage in carbon trading because it’s potentially profitable.

As a general guideline, carbon trading is certainly paired with an overall attempt to reduce carbon emissions in a country over an extended period of time, which means that every year, the number of obtainable credits will be decreased. By encouraging companies to be more efficient in advance, a government could more easily meet emissions decrease goals, as companies will not be likely to change practices immediately, and the carbon trading system creates far more versatility than setting blanket baseline levels.

In some countries, carbon exchanges possess opened up, operating much like inventory exchanges. These organizations help the exchange of carbon credits, ensuring that they flow efficiently through the market, plus they provide standard set prices for credits, based on market demand and general economic health. In some cases, individual citizens may also take part in carbon trading, purchasing credits to offset their private greenhouse gas emissions, and some advocates have recommended that carbon trading ought to be formally expanded to all or any residents, encouraging global and specific involvement in reduction of greenhouse gas emissions.

Scope of Carbon Trading in India:

Indian Market of Carbon Trading: The carbon industry is divided into two parts-that which is compliance motivated and the different being the voluntary market. The extra dominant and lucrative compliance market just accepts carbon credits under the CDM programme, while there are several regional non UN administered voluntary applications worldwide.

For carbon credit trading, India comes after a scheme named Clean Development Mechanism (CDM) or more normally, carbon trading. CDM can be an arrangement under the Kyoto Protocol allowing industrialized countries with a greenhouse gas decrease commitment to invest in emission reducing jobs in developing countries instead of what’s generally considered more costly emission reductions in their individual countries. Under CDM, a developed country can take up a greenhouse gas (GHG) reduction project activity in a growing country where the expense of GHG reduction project actions is usually lower. The developed country will be provided carbon credits for interacting with its emission decrease targets, while the developing country would have the capital and clean technology to put into action the project. Carbon credits happen to be certificates issued to countries that reduce their emission of GHG, which causes global warming. Made countries which have exceeded the amounts can either cut down emissions, or borrow or purchase carbon credits from growing countries.

The Indian market is extremely receptive to CDM. Having cornered over fifty percent of the global total in tradable accredited emission reduction (CERs), Indias dominance in carbon trading beneath the CDM of the UN Convention on weather change is beginning to influence organization dynamics in the country. Carbon credits will be measured in units of CERs, which is equivalent to one tonne of skin tightening and reduction.

Future scope: India’s huge prospect of generation and sale of CERs must be harnessed especially to tap the huge opportunity in europe Emission Trading Program (EU-ETS). Hence, so that you can take vibrancy to the emission industry in the country, there is a need for a transparent platform that will assist buyers and sellers get yourself a fair deal and decrease the margins of the intermediaries to reflect the economic value-addition. With technology at India’s side, it really is time the united states leveraged it for a sustained expansion of the carbon credit rating market. “Indian sectors, which looked at CDM implementation in their process have failed to realize fair prices in many instances due to the currently thriving OTC (over-the-counter) market segments that have fleeced most sellers by buying at rates much lower than that provided by buyers. The MCX-CCX (Chicago Climate Exchange) tie-up can be expected to ensure better cost discovery of carbon credits besides helping the participants cover the risks associated with selling and buying of carbon credits. Additionally, the exchange, with its other ways of educating the eco-system participants, would improve the rewards accruing to them in its endeavor to make India a significant global commodity-trading hub.


The objectives for study are as follows:

To really know what is carbon trading and its own effect on atmosphere.

To know world marketplace of Carbon trading.

To know about the Carbon trading market in India

To know future expansion and scope in India in carbon trading.

Review of Literature:

According to Shilpa Shanbhag,[Dataquest the business enterprise of InfoTech] India must put a price on carbon, since true leaders do not wait for international weather mandates. There is nothing stopping India from establishing a domestic environmental exchange predicated on the rules of the overseas carbon market and converting atmosphere and water pollutants such as CO2, As a result2, NOx and BoD into tradable instruments. NOx and SOx trading schemes in the US have shown research summary that it’s possible to lessen emissions and acid rainfall under an environmental trading scheme. Afterwards she add rather than switching off lights for an hour every year or holding concerts to improve climate change awareness, it might be much sensible to purchase a wind mill, which makes clean electricity. This mill would deliver two-fold advantages of supplying power to the state grid for another 25 years and it could also earn carbon credits.

A 2007 research by the Financial Circumstances discovered the following:

* Widespread instances of men and women and organizations shopping for worthless credits that do not yield any reductions in carbon emissions.

* Industrial companies profiting from doing extremely little–or from gaining carbon credits based on efficiency gains that they have benefited substantially.

* Brokers providing solutions of questionable or no value.

* A shortage of verification, making it difficult for buyers to assess the real value of carbon credits (“Market Found in Carbon Smokescreen,” Financial Times, April 25, 2007)

Accordind to Ecosecuriites ,The best price projection within the survey resulted from the ACCF/NAM model, estimating that a carbon price of $257 would be needed by 2025 to accomplish the emissions reduction target in its “High Cost” scenario. This model’s “High Price” scenario assumed that just 14% of GHG emissions could be offset, as the remaining emissions had to be internally mitigated. This situation as well strictly limited the level at which technology are developed and applied, incorporating a constraint on nuclear by allowing for only 10-25 GW of additional capacity by 2030.The lower selling price projections profiled in this record resulted from the PACE model, estimating a carbon price of only $0.41 would be needed by 2025 to perform the emissions reduction target in its “Multigas” scenario, and the MERGE and MiniCAM models, estimating a needed carbon price of only $0.30 in 2020 for the “6.7 W/m2” scenario. The Rate model gave low ideals partially consequently of assuming a comparatively low GHG emissions baseline and emissions growth over time.


The Carbon trading is one of the fastest growing financial markets on the globe. It is the most visible consequence of early regulatory initiatives to mitigate climate transformation, and grew out from the Kyoto Protocol, which was used in 1997. The protocol requires that by 2012, developed countries will achieve greenhouse gas emission reductions of at least 5% against baseline levels of 1990. To help countries achieve that goal it established the Tidy Development Mechanism (CDM), which encourages sustainable development in developing countries while spurring cost-successful reductions in greenhouse gas emissions in the additional polluting designed countries. India offers a big potential for CDM due to its inherent reliance on fossil fuels for production. So countries with relatively low abatement and deal costs like India are a

major attraction for CDM projects.

The marketplace is emerging strongly despite various global factors, according to the World Bank. Regulation that caps greenhouse gas emissions offers spawned an emerging carbon trade that was valued at US $64 billion (€47 billion) in 2007. For the 3rd consecutive time, China was the community leader in CDM source with a 73% industry share regarding 2007 transacted volume. Brazil and India, at 6% market show each, transacted the best volumes after China. Africa adopted with 5% of the market.

India may be the fourth most significant emitter of greenhouse gases on the globe in absolute terms. But its per capita emission of 1 1.2 tons per person each year is much less than the West’s amount of 20 tons, or compared to the global average of 8 tons. If India has to know its ambitions of financial growth and take large sections of its population from the low income trap, it must develop. That means greenhouse gas emission reductions will



The Earth comes with an atmosphere of the correct depth and chemical composition. About 30% of incoming energy from the sun is reflected back again to space while the rest reaches the planet earth, resulting in warming the oxygen, oceans, and area, and maintaining the average surface temperature around 15 °C. The chemical composition of the ambiance is also in charge of nurturing life on our planet. Most of it really is nitrogen (78%); about 21% is oxygen, which all animals have to survive; and only a little percentage (0.036%) comprises of carbon dioxide which plants need for photosynthesis. The atmosphere carries out the important function of keeping life-sustaining conditions on the planet, in the following way: each day, energy from the sun can be absorbed by the terrain, seas, mountains, etc. If all of this energy were to get absorbed completely, the earth would gradually turn into hotter and hotter. But actually, the earth both absorbs and, simultaneously releases it in the sort of infra red waves (which cannot be seen by our eyes but can be felt as heat, for example the heat that one could feel together with your hands over a heated car engine). All this rising heat isn’t lost to space, but is certainly partly absorbed by some gases present in really small (or trace) amounts in the atmosphere, referred to as greenhouse gases (GHGs). Greenhouse gases (for example, skin tightening and (CO2), methane (CH4), nitrous oxide (N2O), water vapour), re-emit a few of this temperature to the earth’s area. If they did not perform this beneficial function, most of heat strength would escape, leaving the planet earth cold (about -18 °C) and unfit to support life.

However, ever since the Industrial Revolution began about 150 years back, man-made activities have added significant quantities of GHGs to the ambiance. The atmospheric concentrations of carbon dioxide (CO2), methane (CH4), and nitrous oxide (N2O) have grown by about 31%, 151% and 17%, respectively, between 1750 and 2000 (Intergovernmental Panel on Climate Change, IPCC 2001).

As the GHGs happen to be transparent to incoming solar radiation, but opaque to outgoing longwave radiation, an increase in the degrees of GHGs could cause greater warming, which, subsequently, could impact on the world’s climate, resulting in the phenomenon referred to as climate change. Indeed, scientists have noticed that over the 20th century, the mean global area temperature increased by 0.6°C (IPCC 2001). In addition they observed that since 1860 (the year temperature started out to be recorded systematically utilizing a thermometer), the 1990’s have already been the warmest decade.

Important greenhouse gases happen to be: carbon dioxide (CO2), methane (CH4), nitrous oxide (N2O), hydrofluorocarbons (HFC), perfluorocarbons (PFC), and sulfur hexafluoride (SF6). Drinking water vapor is also an important greenhouse gas, but since humans do not generally have a direct affect on drinking water vapor focus in the atmosphere, it is not one of them paper. Because each greenhouse gas traps different amounts of heat and remains in the ambiance for distinct lengths of time, studies use measures of global warming potential (GWP) to assess between gases. Skin tightening and is employed as the benchmark, so all other gases will be measured in skin tightening and equivalence (CO2e)2. Table 1: The global warming potential of six key greenhouse gases (This measure considers the heat trapping talents and the time the gas remains in the ambiance (IPCC 2001a, 2001b))


Global Warming

Potential Atmospheric Existence (years)



5 to 200








140 to 11,700

1.4 to 260


6,500 to 9,200

10,000 to 50,000+





Another IPCC publication claims that there is a “very high confidence” that human activities have induced a net warming of the planet (IPCC 2007a). KYOTO PROTOCOL Presently, various approaches are being implemented to reduce carbon emissions. These range between efforts by persons and firms to lessen their environment footprints to initiatives at town, point out, regional and global amounts. Among they are the commitments of governments to lessen emissions through the 1992 US Framework Convention on Environment Change (UNFCCC) and its 1997 Kyoto Protocol. In 1992 well known Rio earth summit, United Country Framework Convention on Environment Change (UNFCCC) was adopted with a target to stabilize atmospheric concentration of GHG at levels that would prevent harmful humane interference with weather system. The UNFCCC arrived to influence on 21st March, 1994 relating to which industrialized countries shall possess the key responsibility to mitigate climate modification. Such countries are detailed as Annex- I countries. Under UNFCCC all of the member countries had been to report on their national GHG emissions inventories and propose climate change mitigation approaches. After two and half years of extreme negotiation between Annex-I countries, an contract was struck at the today renowned Kyoto protocol on 11 December 1997 in Kyoto, Japan. Born in the 1997 World Earth Summit held at Kyoto, Japan, this Protocol is making miracles in world today. The convention, participated by 160 countries of the community, was to negotiate binding constraints on greenhouse gases for the produced nations pursuant to the aim of the Framework Convention on Weather Change of 1992.

Under the Kyoto Protocol, emission caps were place for every single Annex-I countries, amounting in total to an average reduction of 5.2% below the aggregate emission level in 1990. Each country includes a predetermined aim for of emission reduction as compared with 1990 level. No emission cap is certainly imposed on Non – Annex I countries. However, to motivate the participation of Non-Annex I in emission decrease process a mechanism referred to as Clean Development Device (CDM) has been presented. The carbon markets are a prominent the main response to climate switch and have an opportunity to demonstrate that they can be a credible and central instrument for future climate mitigation. The outcome was the Kyoto Protocol, where the developed nations decided to limit their greenhouse gas emissions, in accordance with the levels emitted in 1990 or pay a cost to those that do. At this time comes the carbon trading. CARBON CREDITS The principal purpose of the Protocol was to make developed countries purchase their methods with emissions while at the same time monetarily worthwhile countries with very good behaviour in this regard. Since developing countries can start with clean technologies, they’ll be rewarded by those trapped with „dirty‟ ones. This technique poises to become a huge equipment for partially transferring prosperity from wealthy, industrialised countries to poor, undeveloped countries. A CER or carbon Credit is defined as the unit related to reduction of 1 tonne of CO2 emission from the baseline of the project activity. Why don’t we say that India decided to choose new vitality station, and has chosen a specific technology at the expense of X crore. An entity from an industrialised nation (which could even be considered a company) offers to supply India with slightly better technology, which costs more (say Y crore), but will cause lower emissions. The industrialised region will only pay the incremental price of the job – viz. Y minus X. In return, the „investing‟ country will get accredited emission reductions‟ (CERs), or credits, which it can use to meet its Kyoto commitments. That is an excellent deal indeed – but also for the investing country. Not only do they sell developing countries their technology, nonetheless they also meet up with their Kyoto commitments without lifting a finger to lessen their domestic emissions. Countries just like the US can continue steadily to pollute at home, as long as it makes the reductions elsewhere.

The World Bank has generated itself a role in the forex market as a referee, broker and macro-manager of international fund flows. The scheme provides been entitled Tidy Development Mechanism, or more commonly, Carbon Trading. CDM Task TYPES Carbon Credits are sold to entities in Annex-I countries, like ability utilities, who’ve emission reduction targets to attain & find it cheaper to buy „offsetting‟ certificate instead of do a clean-up in their backyard. Type of projects, which are being requested CDM and which is often of valuable potential,


• Energy efficiency projects

– Increasing building effectiveness (Concept of Green Building/LEED Rating), eg. Technopolis Building Kolkata

– Increasing commercial/commercial energy productivity (Renovation & Modernization of good old power plants)

– Gasoline switching from more carbon intensive fuels to less carbon intensive fuels; and

– Also contains re-powering, upgrading instrumentation, settings, and/or equipment

• Transport

– Improvements in auto fuel productivity by the launch of new technologies

– Changes in automobiles and/or fuel type, for instance, switch to electric autos or fuel cell automobiles (CNG/Bio fuels)

– Switch of transportation mode, e.g. changing to less carbon intensive means of transfer like trains (Metro in Delhi); and

– Reducing the rate of recurrence of the transport activity

• Methane recovery

– Animal waste products methane recovery & utilization

• Putting in an anaerobic digester & utilizing methane to produce energy

– Coal mine methane recovery

• Collection & utilization of fugitive methane from coal mining;

– Capture of biogas

• Landfill methane recovery and utilization

– Capture & utilization of fugitive gas from gas pipelines;

– Methane collection and utilization from sewage/industrial waste treatment facilities

• Industrial process changes

Any industrial process change leading to the reduced amount of any category greenhouse gas emissions

• Cogeneration

Use of waste warmth from electric generation, such as for example exhaust from gas turbines, for professional purposes or heat (e.g. Distillery-Molasses/ bagasse)

• Agricultural sector

– Energy efficiency advancements or switching to significantly less carbon intensive energy sources for normal water pumps (irrigation)

– Methane reductions in rice cultivation

– Reducing animal waste products or using produced pet waste for energy era (see also under methane recovery) and

– Any other changes within an agricultural practices leading to reduction of any group of greenhouse gas emissions


India comes beneath the third category of signatories to UNFCCC. India signed and ratified the Protocol in August, 2002 and offers emerged as a world leader in reduction of greenhouse gases by adopting Clean Development Mechanisms (CDMs) in the past couple of years. According to Statement on National Action Arrange for operationalising Clean Creation Mechanism(CDM) by Preparation Commission, Govt.of India, the total CO2-equivalent emissions in 1990 had been 10, 01, 352 Gg (Gigagrams), that was roughly 3% of global emissions. If India can catch a 10% talk about of the global CDM industry, gross annual CER revenues to the country could range from US$ 10 million to 300 million (assuming that CDM is used to meet up 10-50% of the global demand for GHG emission reduction of roughly 1 billion tonnes CO2, and prices range from US$ 3.5-5.5 per tonne of CO2). As the deadline for getting together with the Kyoto Protocol targets draws nearer, prices can be expected to rise, as countries/corporations save carbon credits to meet strict targets in the future. India is well ahead in establishing a full-fledged program in operationalising CDM, through the Designated National Authority (DNA).Apart from Industries and transportation,the significant resources of GHG’s emission in India are as follows :

• Paddy fields

• Enteric fermentation from cattle and buffaloes

• Municipal Solid Waste

Of the on top of three options the emissions from the paddy areas could be reduced through unique irrigation strategy and suitable choice of cultivars; whereas enteric fermentation emission may also be reduced through proper feed management. In latest days the third source of emission i actually.e. Municipal Solid Waste material Dumping Grounds will be emerging as a potential CDM activity despite being provided least focus till date.

Present status of dumping grounds in India:

In India, due to increased population & commercial development, cities will be facing probles of SW (Municipal Solid Waste products) disposal. The urban population in greater towns and locations in India is raising at a decadal development rate of above 40%. There happen to be no Sanitary Landfill sites in India at the moment. Municipal Solid Waste is merely dumped without any treatment into area (depressions, ditches, soaked ponds) or on the outskirts of the town in an unscientific manner without compliance of regulations. The prevailing dumping grounds in India will be complete and overflowing beyond capability. It is difficult to get different dumping yards and if available, they are a long way away from the city which adds to the exorbitant cost of transportation

Various processes/technologies available to reduce the amount of Municipal Sturdy Waste are as follows.

1. Physical (a. Pelletisation)

2. Biochemical (a. Aerobic Composting

b. Anaerobic Digestion)

3. Thermal (a. Incineration b. Gasification)

Among the above alternatives/technologies

following are believed as favorable to implement

in India.

1. Pelletisation,

2. Anaerobic digestion employing bio-methanation

technology for production of power,

3. Production of organic and natural manure using

controlled aerobic composting.

a) India – high potential of carbon credits

b) India can catch 10% of Global CDM market

c) Annual income estimated range from US$10 million to 330 million

d) Wide spectrum of projects with different sizes

e) Vast technical human being resource

f) Strong commercial base

g) Dynamic, transparent & speedy processing by Indian DNA (NCDMA) for host country acceptance h) MoU Signed between MoP and GTZ (Oct 2006)- Indo German Strength program (IGEN)

• Baseline CO2 Emissions from Power Sector already in place- first CDM country

• Improvement in EE

• CDM in Electric power Sector



Greenhouse gas abatement insurance policy design is exceedingly difficult because GHG emissions result from almost all modern human activities. It consists of every sector of the economy in addition to habits and choices of people. Economics is a lot more than only a study of business, it is the science which studies human being behavior as a marriage between aspirations and the scarce methods to reach those goals. Individuals make decisions each day that influence the volume of greenhouse gases that type in the atmosphere. If a well balanced climate is one goal among the many to which culture aspires, afterward economics is an instrument well-suited to comprehend how those decisions are created and how reliable and effective outcomes could be reached. Indian Discussion board India is a celebration to the United Nations Framework Convention on Climate Change (UNFCCC) and the aim of the Convention is to achieve stabilization of greenhouse gas concentrations in the atmosphere at a level that would prevent risky anthropogenic interference with the environment system. To fortify the developed country commitments under the Convention, the Parties used Kyoto Protocol in 1997, which commits developed country Parties to return their emissions of greenhouse gases to typically approximately 5.2% below 1990 levels over the period 2008-12. The Seventh Conference of Functions (COP-7) to the UNFCCC decided that Parties participating in CDM should designate a National Authority for the CDM and according to the CDM project cycle, a project proposal will include written authorization of voluntary participation from the Designated National Authority of every country and confirmation that the project activity assists the sponsor country in achieving sustainable development. Accordingly the Central Government constituted the National Clean Development Mechanism (CDM) Authority for the purpose of protecting and improving the quality of environment with regards to the Kyoto Protocol. The CDM Authority gets the powers: (a) to invite officials and professionals from Government, financial institutions, consultancy organizations, non-governmental organizations, civil society, legal job, industry and commerce, as it may deem necessary for specialized and professional inputs and may co-opt other people depending upon need. (b) to connect to concerned authorities, institutions, individual stakeholders for matters associated with CDM. (c) to take up any environmental issues pertaining to CDM or Sustainable Advancement projects as may be described it by the Central Authorities, and (d) to recommend recommendations to the Central Authorities for consideration of assignments and rules to be used for according sponsor country approval.

As discussed above, India includes a vast possibility to explore when it comes to CDM and carbon-credits. Through its giant ongoing Infrastructure tasks and assignments on non-conventional energy options, a fresh phase of development continues to be to be observed, moderate start of which has already begun.


There is a wonderful prospect awaiting India in carbon trading which is definitely estimated to go up to $100 billion by 2010. In the new regime, the country could emerge among the major beneficiaries accounting for 25 per cent of the total globe carbon trade, says a recent World Bank report. The countries like US, Germany, Japan and China will tend to be the biggest purchasers of carbon credits which are advantageous for India to an excellent extent. The Indian market is extremely receptive to completely clean Development Mechanism (CDM). Having cornered thesis statement help more than half of the global total in tradable certified emission lowering (CERs), India’s dominance in carbon trading under the clean development system (CDM) of the UN Convention on Climate Switch (UNFCCC) is beginning to influence organization dynamics in the country. India Inc pocketed Rs 1,500 crores in he year 2005 simply by advertising carbon credits to developed-country clients. Various tasks would make up to 306 million tradable CERs. Analysts claim if more companies absorb clean technology, total CERs with India could contact 500 million. Of the 391 tasks sanctioned, the UNFCCC offers registered 114 from India, the highest for any country. India’s average gross annual CERs stand at 12.6% or 11.5 million. Consequently, MSW dumping grounds can be a big prospect for CDM jobs in India. These types of projects wouldn’t normally only be beneficial for the federal government bodies and stakeholders also for general public.