Group H Carbon Credits Business Case

About Carbon Credits Carbon credits are certificates issued to countries that reduce their GHG emissions One credit = 1 tonne of CO2 (or CO2 equivalent) reduced Surplus credits result when a country overshoots its reduction target – These can be traded, with countries facing a shortfall in target able to buy and meet their targets – Carbon credit trading encourages emission reduction, provides financial incentives to those who do Carbon credits can be acquired through – Clean development mechanism (CDM): Project-based emission reduction activities in developing countries – Joint implementation (JI): Two developed countries can invest in emission mitigation projects, generating ERUs – International emission trading (IET): Credit deficient and credit surplus countries (that have ratified the Kyoto Protocol) can trade carbon credits at specialised exchanges (European Climate Exchange, Chicago Climate Exchange, UK’s CO2E Exchange)

Business Opportunity Developed countries have to spend nearly $300 to $500 for every tonne reduction in CO2, against $10 to $25 to be spent by developing countries. In developing countries like India, the emission levels are much below the target fixed by the Kyoto Protocol. So, they are excluded from reduction of GHG emission. On the contrary, they are entitled to sell surplus credits to developed countries. The European countries and Japan are the major buyers of carbon credits. This is what makes trading in carbon credits such a great business opportunity. Foreign companies which cannot fulfil the protocol norms can buy the surplus credit from companies in other countries. This lead to a flourishing trade in Credit Emission Reduction. Market for Billions of dollars in emerging markets. In India about 1700 CDM’s have been approved. Companies that sell carbon credits also have vastly different business models. Some function as little more than middlemen—buying up credits and selling them at a markup. That model has been criticized for making it hard to tell where the credits originally come from. Other companies work with projects from scratch to ensure that the credits they generate are on the level. Opportunity to be intermediary or to start a CDM project.

Carbon credit trade India is considered as the largest beneficiary, claiming about 31 per cent of the total world carbon trade through the Clean Development Mechanism (CDM). Indian companies are fast realizing there’s money to be made by becoming eco-friendly. With new core sector projects like power and steel coming up in India, the carbon credit market will rise once again. The 800 million farming community in India has also a unique opportunity where they can sell Carbon Credits to developed nations. Certified emissions reductions (CERs) are the currency of the clean development mechanism (CDM). CERs can be used to acquire technology, capital investments in projects aimed at reducing carbon emissions. Clean Development Mechanism (CDM) Many projects initiated by the domestic companies after January 2000 in diverse areas such as energy efficiency, co-generation, natural gas alternative fuels and hydel power will also add to the country’s dominance as a larger seller in the carbon market.

Current issues Market is not completely regulated Did Not get information on any Intermediary other than a few banks Reach needs to be very high but there is no defnition of how the govt or agencies want to attain this reach.