http://articles.timesofindia.indiatimes.com/2007-09-09/open-space/27975771_1_carbon-creditsemissions-co2 What are carbon credits?

One carbon credit is equivalent to one tonne of CO2 emissions. Credits can be sold in the international market at the prevailing prices via certain credit exchanges. Formalised in the Kyoto Protocol, carbon credits help developing/ underdeveloped countries as they traditionally have lower per-capita carbon emissions than developed countries and will need to emit CO2 owing to increasing industrial growth. At this point though, these countries can sell their carbon credits to other countries and reap the economic benefits of not polluting the planet. Amol Badsra http://in.answers.yahoo.com/question/index?qid=20071217055955AAkPacE
Carbon credits are a key component of national and international emissions trading schemes. They provide a way to reduce greenhouse effect emissions on an industrial scale by capping total annual emissions and letting the market assign a monetary value to any shortfall through trading. Credits can be exchanged between businesses or bought and sold in international markets at the prevailing market price. Credits can be used to finance carbon reduction schemes between trading partners and around the world. There are also many companies that sell carbon credits to commercial and individual customers who are interested in lowering their carbon footprint on a voluntary basis. These carbon offsetters purchase the credits from an investment fund or a carbon development company that has aggregated the credits from individual projects. The quality of the credits is based in part on the validation process and sophistication of the fund or development company that acted as the sponsor to the carbon project. This is reflected in their price; voluntary units typically have less value than the units sold through the rigorously-validated Clean Development Mechanism Background Burning of fossil fuels is a major source of industrial greenhouse gas emissions, especially for power, cement, steel, textile, and fertilizer industries. The major greenhouse gases emitted by these industries are carbon dioxide, methane, nitrous oxide, hydro fluorocarbons (HFCs), etc., which all increase the atmosphere's ability to trap infrared energy and thus affect the climate. The concept of carbon credits came into existence as a result of increasing awareness of the need for controlling emissions. The IPCC has observed that: Policies that provide a real or implicit price of carbon could create incentives for producers and consumers to significantly invest in low-GHG products, technologies and processes. Such policies could include economic instruments, government funding and regulation, while noting that a tradable permit system is one of the policy instruments that has been shown to be

environmentally effective in the industrial sector, as long as there are reasonable levels of predictability over the initial allocation mechanism and long-term price. The mechanism was formalized in the Kyoto Protocol, an international agreement between more than 170 countries, and the market mechanisms were agreed through the subsequent Marrakesh Accords. The mechanism adopted was similar to the successful US Acid Rain Program to reduce some industrial pollutants.

The Protocol agreed 'caps' or quotas on the maximum amount of Greenhouse gases for developed and developing countries In turn these countries set quotas on the emissions of installations run by local business and other organizations, generically termed 'operators'. Countries manage this through their own national 'registries', which are required to be validated and monitored for compliance by the UNFCCC. Each operator has an allowance of credits, where each unit gives the owner the right to emit one metric tonne of carbon dioxide or other equivalent greenhouse gas. Operators that have not used up their quotas can sell their unused allowances as carbon credits, while businesses that are about to exceed their quotas can buy the extra allowances as credits, privately or on the open market. As demand for energy grows over time, the total emissions must still stay within the cap, but it allows industry some flexibility and predictability in its planning to accommodate this. By allowing allowances to be bought and sold, an operator can seek out the most cost-effective way of reducing its emissions, either by investing in 'cleaner' machinery and practices or by purchasing emissions from another operator who already has excess 'capacity'.

Emission markets For trading purposes, one allowance or CER is considered equivalent to one metric tonne of CO2 emissions. These allowances can be sold privately or in the international market at the prevailing market price. These trade and settle internationally and hence allow allowances to be transferred between countries. Each international transfer is validated by the UNFCCC. Each transfer of ownership within the European Union is additionally validated by the European Commission. Climate exchanges have been established to provide a spot market in allowances, as well as futures and options market to help discover a market price and maintain liquidity. Carbon prices are normally quoted in Euros per tonne of carbon dioxide or its equivalent (CO2e). Other greenhouse gasses can also be traded, but are quoted as standard multiples of carbon dioxide with respect to their global warming potential. These features reduce the quota's financial impact on business, while ensuring that the quotas are met at a national and international level. Currently there are at least four exchanges trading in carbon allowances: the Chicago Climate Exchange, European Climate Exchange, Nord Pool, and PowerNext. Recently, NordPool listed a contract to trade offsets generated by a CDM carbon project called Certified Emission Reductions (CERs). How buying carbon credits can reduce emissions

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. By way of example, consider a business that owns a factory putting out 100,000 tonnes of greenhouse gas emissions in a year. Its government then enacts a law that limits the emissions that the business can produce. So the factory is given a quota of say 80,000 tonnes per year. The factory either reduces its emissions to 80,000 tonnes or is required to purchase carbon credits to offset the excess. After costing up alternatives the business may decide that it is uneconomical or infeasible to invest in new machinery. Instead may choose to buy carbon credits on the open market from organizations that have been approved as being able to sell legitimate carbon credits. * One seller might be a company that will offset emissions by planting a number of trees for every carbon credit you buy from them under an approved CDM project. So although the factory continues to emit gases, it would pay another group to go out and plant trees which will draw back 20,000 tonnes of carbon dioxide from the atmosphere each year. * Another seller may have already invested in new low-emission machinery and have a surplus of allowances as a result. The factory could make up for its emissions by buying 20,000 tonnes of allowances from them. The cost of the seller's new machinery would be subsidized by the sale of allowances. Both the buyer and the seller would submit accounts for their emissions to prove that their allowances were met correctly.

The EU is seeking to rectify the problem ahead of the second phase of the scheme, which starts next year, and recently rejected many member countries proposed emission allowances for the next phase as too high, ordering them to go away and come back with lower caps that will force more firms to cut emissions or buy credits. However, Jepma argued that with no link existing between the first and second phase of the scheme the cost of carbon credits will drop to almost nothing by the end of the year.

Meanwhile, Jepma warned that Russia and many of the Central European States are on track to be well below their Kyoto emission targets for 2012 meaning they will generate 2.8bn credits or Assigned Amount Units that they can sell to those countries unable to meet their Kyoto obligations. This means that there will be a supply of 5.2bn tonnes worth of assorted carbon credits available under the various Kyoto carbon trading mechanisms by 2012, but the biggest polluters in the scheme the EU, Canada and Japan are expected to exceed their targets by just 3.6bn tonnes

http://en.wikipedia.org/wiki/Emissions_trading

In the Kyoto Protocol, Annex I countries are subject to caps on emissions, but non-Annex I countries are not. Barker et al.. (2007) assessed the literature on leakage. The leakage rate is defined as the increase in CO2 emissions outside of the countries taking domestic mitigation action, divided by the reduction in emissions of countries taking domestic mitigation action. Accordingly, a leakage rate greater than 100% would mean that domestic actions to reduce emissions had had the effect of increasing emissions in other countries to a greater extent, i.e., domestic mitigation action had actually led to an increase in global emissions. Estimates of leakage rates for action under the Kyoto Protocol ranged from 5 to 20% as a result of a loss [50] in price competitiveness, but these leakage rates were viewed as being very uncertain. For energyintensive industries, the beneficial effects of Annex I actions through technological development were viewed as possibly being substantial. This beneficial effect, however, had not been reliably quantified

http://articles.timesofindia.indiatimes.com/2012-09-22/mumbai/34021706_1_gorai-dumpemission-reduction-carbon-credits

Bruhanmumbai Municipal Corporation to cough up Rs 15cr carbon credits

Bhavika Jain, TNN Sep 22, 2012, 05.24AM IST

Tags: CERS| carbon credits| Bruhanmumbai Municipal Corporation| BMC

MUMBAI: The BMC-appointed consultant's overestimation of generation of carbon credits during the Gorai dumping ground's closure project has not just caused the civic body embarrassment but also translated into a Rs 15 crore loss. The BMC had got Rs 24.5 crore from the Asian Development Bank (ADB) in exchange for the estimated generation of 4.3 lakh emission reduction units over five years, starting 2009. One emission reduction unit, or a carbon credit, equals one tonne of carbon dioxide reduced. There are two kinds of emission unitscertified and verified emi ssion reductions (CERs and VERs; see 'Trade in Pollution' ). Of the total 4.3 lakh un its, till June 2012, the project was to generate 2.7 la kh units. However, just a fraction14 ,477 unitswas actually generated. The ADB, in a formal communication , therefore asked the BMC to either pay back the entire amount or bridge the gap between the estimated and actual units generated by buying 4.3 lakh emission reduction units from the open marketwhich is expected to cost approximately Rs 15 crore. The BMC has decided to opt for the latter; a proposal for purchasing the units will be tabled at a civic standing committee meet next week. The remaining Rs 9 crore would be adjusted till 2014. The consultant, IL&FS, was appointed in 2008 to study the amount of carbon credits the Gorai dumping ground's closure would generate. It had estimated 12.3 lakh emission

reduction units over 10 years and 4.3 lakh over five years. Based on this report, the civic body entered into an emission-purchase agreement with the ADB and, in 2009, pre-sold the units for five years, for Rs 24.5 crore. The consultant was paid a fee of Rs 1.2 crore in 2009. Going by the estimate, the BMC was to get Rs 72 crore for ten years. The BMC has now issued a showcause notice to the consultant asking for the reasons why its estimate was way off the mark. "We have asked the consultant to return the fee. We have also asked it to conduct all the formalities for purchasing CERs from the open market, to be returned to ADB, free of cost," said Mohan Adtani, additional municipal commissioner. The scientific closure of the Gorai dump started in 2007, following a Supreme Court order on a petition filed by the locals against the BMC. The closure was completed in 2009. The failure has also toppled BMC's plan to set up a 2-megawatt energy plant from gas generated from the project. The draft letter submitted to the standing committee mentions the consultant did not take into account debris and plastic waste, which on being processed, does not generate gas. Also, it did not take into account 10.03 lakh metric tonne of waste at the site before the closure began. Of this, only 2.34 lakh tonne was available . It adds that due to the city's climate waste is decomposed easily.