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Carbon Trading by Asim

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    BUILDING SCIENCE & SERVICES

    CARBON TRADINGIN INDIA

    SUBMITTED BY:-

    ASIM BIKASH MANDAL NAVEEN JOSE A.S.N SASHANK SUMAN SAURAV

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    CARBON TRADING ARRIVES IN INDIA

    Well, what is Carbon Trading? Lets rewind to the Kyoto

    Protocol of 1997 by which all countries are required toreduce their greenhouse gas emissions by 5% --from

    1990 levels-- in the next ten years, ie 2012or pay a

    price to those that do.

    The idea was to make developed countries pay for theirwild ways with emissions while at the same time

    monetarily rewarding countries with good behaviour in

    this regard.

    Since developing countries can start with cleantechnologies, they will be rewarded by those stuck with

    dirty ones.

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    Say a company in India can

    prove it has prevented theemission of x-tonnes of carbon,

    it can sell this good carbon-

    karma to a company in say, the

    US which has a bad karma.

    The scheme has been entitled

    Clean Development Mechanism

    [CDM] in 2000. Or more

    commonly, Carbon Trading.

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    Commitments of Parties

    Annex 1 Country Parties

    Developed countries and countries whose

    economies are in transition

    Adopt policies and measures to limit their

    anthropogenic emissions of GHGs and

    protect/enhance their GHG sinks and reservoirs

    to demonstrate that they are taking the lead in

    modifying longer-term trends.

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    Submit their national communications on

    regular basis with the following information:

    ? Projected anthropogenic GHG emissions by

    sources and sinks with the aim of returning them

    to 1990 levels, individually or jointly

    ? Policies and measures to limit GHG emissions and

    protect/enhance sinks and reservoirs

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    Annex II Country Parties

    Under Article 4.2 of the UNFCCC, developed countryparties included in Annex II (Annex 1 countries minusthe economies in transition) have the followingadditional commitments:

    Provide new and additional financial resources tomeet the agreed full costs incurred by developing

    country Parties in complying with their obligationsunder Article 12.

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    Provide financial resources, including transfer of

    technology to meet the agreed full incremental costsof measures to be undertaken by developing country

    Parties under Article 4.

    Promote, as appropriate, the transfer of, or, facilitate

    and finance access to, environmentally sound

    technologies and know-how to other Parties,particularly the developing ones to enable them to

    implement the provisions of the Convention.

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    Non-Annex 1 Country Parties

    ? Non-annex 1 country Parties or developing

    countries

    ? Have no commitments to reduce their GHG

    emissions, but only to develop, periodically

    update, publish and make available to the

    Conference of Parties, their national inventories ofGHG emissions by sources and removals by sinks.

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    THE KYOTO PROTOCOL

    The Kyoto Protocol is an international agreement

    of 159 countries, which attended the 3rd Session of

    the Conference of the Parties to the UNFCCC held

    in December 1997 in Kyoto, Japan.

    This formalized the adoption of the results of the

    Berlin Mandate (CoP 1) to reduce worldwide

    emissions in GHGs.

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    Objective of the Kyoto Protocol

    The protocol was developedto meet the ultimate objective of

    the UNFCCC which is to stabilize

    GHG concentrations in the

    atmosphere at a level that wouldprevent anthropogenic

    interference with the climate

    system, through quantified

    emission targets within aspecified time frame.

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    Significant Provisions of the Kyoto

    Protocol Annex 1 Country Parties, individually or jointly,

    ensure that their aggregate anthropogenic CO2equivalent emissions of GHG do not exceed their

    assigned amounts.

    Reduction of their overall emissions by at least

    5% below 1990 levels in the commitment period2008 to 2012.

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    The Protocol commits Annex B countries that

    ratify the Protocol to reduce GHG emissions below1990 levels by the first commitment period (2008-

    2012)

    The Protocol will be legally binding when it entersinto force. It must be signed and ratified by at least

    55 countries, whose total emissions represent 55%

    of the emissions of the Annex I countries in 1990.

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    Incorporation by Annex 1 Parties in its annual

    inventory of anthropogenic emissions the sourcesand removals by sinks of GHG gases.

    Expert review process, providing a thorough andcomprehensive technical assessment of the

    implementation of this protocol.

    No introduction of new commitments for Partiesnot included in Annex 1.

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    The Kyoto Protocol reinforces theprinciple of commoncommon butbut

    differentiateddifferentiated responsibilitiesresponsibilities..

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    THE KYOTO PROTOCOL FLEXIBILITY

    MECHANISMS

    EMISSIONS TRADING

    JOINT IMPLEMENTATION

    CLEAN DEVELOPMENT MECHANISM

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    Emissions Trading (ET)Article 17

    - Permits countries to transfer partsof their allowed emissions (assigned

    amount units)

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    Joint Implementation (JI)

    Article 6

    - Allows countries to claim credit for

    emission reductions that arise frominvestment in other industrialized

    countries, which result in a transfer of

    equivalent emission reduction unitsbetween the countries.

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    Clean Development Mechanism

    (CDM)Article 12 KP

    Allows emission reduction projects that assist in

    creating sustainable development in developing

    countries to generate certified emission

    reductions (CERs) for use by the investor.

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    Greenhouse Gases

    covered by the Kyoto Protocol

    Carbon dioxide (CO2)

    Methane (CH4)Nitrous Oxide (N2O)

    Hydrofluorocarbons (HFCs)

    Perflourocarbons (PFCs)Sulphur hexafluoride (SF6)

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    ANNEX B

    ANNEX 1 PartyANNEX 1 Party Quantified EmissionQuantified EmissionLimitation or ReductionLimitation or ReductionCommitment (Commitment (fr.fr. BaseBaseyear or periodyear or period))

    Australia 108EuropeanCommunity 92Japan 94Netherlands 92Russian Federation 92USA 93

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    THE CLEAN DEVELOPMENTTHE CLEAN DEVELOPMENT

    MECHANISMMECHANISM

    (CDM)(CDM)

    Art. 12 KP

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    Objectives of the CDM

    Assists non-Annex 1 countries in achieving their

    sustainable development objectives

    Enables Annex 1 parties in achieving compliance

    with their quantified emissions limitation and

    reduction commitments (QELRC)

    Investors benefit by obtaining GHG emission

    reduction credits

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    Objectives of the CDM

    Host countries benefit in the form of investment,access to better technology, and local sustainable

    development

    Contribute to the ultimate objective of the

    Framework Convention on Climate Change

    Developing countries will benefit from the projectactivities resulting in certified emission reductions

    (CERS) and developed countries will benefit by using

    the CERs to meet their commitments.

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    Principal Requirements for CDMProjects

    Only Parties to the Protocol could participate;

    Participation is voluntary and approved by eachParty;

    National CDM authority to be set up;

    Non-Annex I Parties (host country) must benefit

    from project activities resulting in certified emission

    reductions (CERs);

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    Principal Requirements for CDM

    Projects

    Projects must assist host countries in achieving

    sustainable development and contributing to the

    ultimate objective of the Convention;

    Projects must result in real, measurable and long-

    term benefits related to the mitigation of climate

    change;

    Projects must result in reductions in emissions that

    are additional to any that would occur in the

    absence of the certified project activity.

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    Principal Requirements for CDM

    Projects

    The COP/MOP shall elaborate modalities and procedures

    that ensure transparency. Efficiency and accountability

    through independent auditing by operating entities and

    verification of project activities;

    A share of proceeds from the CERs will be collected from

    the CERs issued to meet the administrative costs of the

    secretariat maintaing CDM activities as well as

    adaptation fund set up to assist developing countries

    that are seriously affected by climate change.

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    Principal Requirements for CDM

    Projects

    Projects formally initiated under the Activities

    Implemented Jointly are eligible to be convertedinto CDM effectively from January 2000 if they meet

    the criteria.

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    Host Country Approval

    Eligibility Criteria

    PurposeThe purpose of the clean development mechanism

    (CDM) is defined in Article 12 of the Kyoto Protocol to theUnited Nations Framework Convention on Climate Change.

    The CDM has a two-fold purpose: (a) to assist developing

    country Parties in achieving sustainable development,

    thereby contributing to the ultimate objective of the

    Convention, and (b) to assist developed country Parties in

    achieving compliance with part of their quantified emission

    limitation and reduction commitments under Article 3.

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    EligibilityThe project proposal should establish the following

    in order to qualify for consideration as CDM project

    activity:

    Additionalities: Emission Additionality: The project should lead to real,

    measurable and long term GHG mitigation. The

    additional GHG reductions are to be calculated with

    reference to a baseline.

    Financial Additionality: The procurement of CertifiedEmission Reduction (CERs) should not be from Official

    Development Assistance (ODA).

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    Sustainable Development IndicatorsIt is the prerogative of the host Party to confirm whether a

    clean development mechanism project activity assists it in achieving

    sustainable development. The CDM projects should also beoriented towards improving the quality of life of the poor from the

    environmental standpoint.

    Following aspects should be considered while designing

    CDM project activity:

    1.Social well being:The CDM project activity should lead to alleviation of poverty

    by generating additional employment, removal of social disparities

    and contribution to provision of basic amenities to people leadingto improvement in quality of life of people.

    2. Economic well being:The CDM project activity should bring in additional

    investment consistent with the needs of the people.

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    3. Environmental well being:

    This should include a discussion of impact of the project

    activity on resource sustainability and resource degradation, if

    any, due to proposed activity; bio-diversity friendliness; impact

    on human health; reduction of levels of pollution in general;

    4. Technological well being:The CDM project activity should lead to transfer of

    environmentally safe and sound technologies that are

    comparable to best practices in order to assist in upgradation

    of the technological base. The transfer of technology can be

    within the country as well from other developing countries

    also.

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    The Seventh Conference of Parties (COP-7) to the UNFCCCdecided that Parties participating in CDM should designate a

    National Authority for the CDM.

    As per the CDM project cycle, a project proposal should include

    written approval of voluntary participation from the DesignatedNational Authority of each country and confirmation that the

    project activity assists the host 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 in terms of

    the Kyoto Protocol.

    National CDMA Authority

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    The composition of the "National Clean Development Mechanism(CDM) Authority" is as follows:

    1. Secretary (Environment and Forests) Chairperson

    2. Foreign Secretary or his nominee Member

    3. Finance Secretary or his nominee Member

    4. Secretary, Industrial Policy and Promotion or his nominee Member5. Secretary, Ministry of Non Conventional Energy Sources or his nominee Member

    6. Secretary, Ministry of Power or his nominee Member

    7. Secretary, Planning Commission or his nominee Member

    8. Joint Secretary (Climate Change), Ministry of Environment and Forests Member

    9. Director (Climate Change), Ministry of Environment and Forests Member-

    Secretary

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    EVALUATION PROCEDURE

    CDM Authority receives projects for evaluation and approval as per the guidelines

    and general criteria laid down in the relevant rules and modalities pertaining toCDM in addition to the guidelines issued by the Clean Development Mechanism

    Executive Board and Conference of Parties serving as Meeting of Parties to the

    United Nations Framework Convention on Climate Change.

    The evaluation process of CDM projects includes an assessment of the probability of

    eventual successful implementation of CDM projects and evaluation of extent towhich projects meet the sustainable development objectives, as it would seek to

    prioritize projects in accordance with national priorities.

    CDM Authority can recommend certain additional requirements to ensure that the

    project proposals meet the national sustainable development priorities and comply

    with the legal framework so as to ensure that the projects are compatible with thelocal priorities and stakeholders have been duly consulted.

    The Authority ensures that in the event of project proposals competing for same

    source of investment, projects with higher sustainable development benefits and

    which are likely to succeed are accorded higher priority.

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    The Authority also carries out the financial review of project proposals to ensure

    that the project proposals do not involve diversion of official development

    assistance in accordance with modalities and procedures for Clean Development

    Mechanism and also ensure that the market environment of the CDM project is

    not conducive to under-valuation of Certified Emission Reduction (CERs)

    particularly for externally aided projects.

    The Authority carries out activities to ensure that the project developers have

    reliable information relating to all aspects of Clean Development Mechanism

    which include creating databases on organizations designated for carrying out

    activities like validation of CDM project proposals and monitoring and verification

    of project activities, and to collect, compile and publish technical and statistical

    data relating to CDM initiatives in India.

    The Member-Secretary of the National Clean Development Mechanism (CDM)

    Authority is responsible for day-to-day activities of the Authority including

    constituting committees or sub-groups to coordinate and examine the proposals

    or to get detailed examination of the project proposals.

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    Carbon Funds & Facilities

    The World Bank Carbon Finance Unit (CFU) uses money

    contributed by governments and companies in OECD countries to

    purchase project-based greenhouse gas emission reductions in

    developing countries and countries with economies in transition.The emission reductions are purchased through one of the CFU's

    carbon funds on behalf of the contributor, and within the

    framework of the Kyoto Protocol's Clean Development

    Mechanism (CDM) or Joint Implementation (JI).

    Organisation for Economic Co-operation and Development - OECD

    Welcome to the OECD, an international organisation helping governments tackle the economic, social and governancechallenges of a globalised economy.

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    Thank you


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