CARBON

MARKET
-
A HOT BUSINESS OPPORTUNITY IN
GLOBAL WARMING

PRESENTED BY:
AANCHAL KAPOOR &
REET KAUR
Global Warming is a concern for everyone across all the countries. The international
associations, agencies, environmentalists, NGOs, political forum at national and
international levels and many more have been actively participating in various
debates discussing the causes and effects of global warming and measures to
mitigate the same. This entire process of discussion has emerged a new business
opportunity known as CARBON MARKET, which is now a days one of the largest
commercial markets in the world.
But before discussing this business opportunity lets have an understanding of the
subject of GLOBAL WARMING.
Like, on a very hot day the car gets hotter when it is out in the parking lot because
the heat and light from the sun gets into the car through window but it cant get back
out. In the same manner, heat and light can get through the atmosphere but it cant
get out due to the presence of greenhouse gases such as: Water vapour, Ozone,
Corbondioxide, Chlorofluorocarbons, Methane, etc. in the atmosphere. This sets in
the Greenhouse Effect. It is a natural phenomenon which makes the earth
appropriate for living beings and vegetation.
But as we know excess of everything is bad. The problem begins when human
activities distort and accelerate the natural process by creating more green house
gases in the atmosphere than are necessary to warm the planet to an ideal
temperature. This enhanced greenhouse effect is known as GLOBAL WARMING.

CAUSES of GLOBAL WARMING

We may categorize the causes into two:
Human Activities
Natural Causes
Human causes are created by human activities like:
1. Pollution: means presence of harmful substances in the environment. It comes in
many forms:
Smoke emission from factories
Smoke emission from burning of Industrial and household garbage etc.
All this sends an enormous amount of green house gases into the air and makes
global warming worse.
2. Electricity: Fossil fuels are burned to create electricity which in turn emits green
house gases and worsening the situation.
3. Refrigeration: Its also one of the causes as it uses CFCs and HCFCs; which are
powerful green house gases.
4. Deforestation: means cutting down of trees. Trees and other plants collect
corbondioxide which is a green house gases.
Natural causes are the activities created by nature like:
1. Volcanic Eruptions: due to volcanic eruptions a large amount of dust is thrown
into the sky which acts as a shield to solar radiation and causes cooling trend in
the atmosphere.
2. Sunspots: these change the solar radiation levels which affect the earths
climate.
3. Wobbling Earth: instead of perfect rotation the earth actually wobbles
exposing the northern and southern latitudes more or less to solar radiation
causing changes in the earths atmosphere.

WHO IS RESPONSIBLE FOR GLOBAL WARMING ?

The globe has been divided primarily into two blocks - one consists of developed
countries and other consists of developing or under developed countries. It is a
recognized truth that the so called developed nations who have been economically
progressing for last more than 150 years of industrialization re principally responsible
for high emissions of the green house gases and the alarming situation has been
created which challenges the survival of the earth itself.

EFFECTS OF GLOBAL WARMING:

1. Rise in the temperature has resulted into melting of the Glaciers which raises the
sea level. Also it reduces supplies of fresh water as flooding occurs along
coastlines worldwide and salt water reaches inland.
2. Many of the world endangered species have or would be extinct as rising
temperature changes their habitat.
3. Millions of people have been affected, especially poor people who depends on the
land for a substance living.
4. Certain vector borne diseases carried by animals or insects, such as malaria,
would become more widespread as warmer climate expand their range.
5. Lower agricultural production.
6. Increased radiation.
7. Reduced biomass production.
8. Lower soil moisture.
9. Increased evapotranspiration.

SOLUTION TO THE PROBLEM:

Some simple actions which can be taken to help reduce Global Warming:
 1. Reduce, Refuse & Recycle:
- Reduce waste by choosing reusable products instead of disposables.
- Buying products with minimal packaging will help to reduce waste.
- Recycle whatever and whenever we can.
2. Using less Heat and Air-conditioning: by adding insulation to walls and
installing weather stripping around doors and windows which will reduce the
amount of energy we need to heat and to cool our home.
3. Changing Tungsten light bulbs: with fluorescent lights like CFLs which use
two-third energy than incandescent bulbs.
4. Driving less and Driving smart: less driving means fewer emissions and while
driving also make sure that the car is running efficiently.
5. Buying energy efficient products: which requires less energy.
6. Less use of hot water
7. Switch off the lights when not in use
8. Planting new trees
9. Adopting sustainable agriculture practices.
10. Encouraging others to conserve resources thereby helping to mitigate global
warming.
All these steps will help in reduction of emission of green house gases and controlling
the global warming.

CARBON MARKET-A HOT BUSINESS OPPORTUNITY

Its true that developed countries have been responsible for the present situation as
compared to developing ones. However, every country is much concerned about the
climate and is in one way or the other taking measures to mitigate the effect of
global warming.
With a view to take a major step in this direction the KYOTO PROTOCOL was adopted
in 1997.
The PROTOCOL is an international agreement between 176 nations and the parties to
the agreement are divided into two categories:
Annexure I : comprise of 41 developed nations including USA, UK, EU, RUSSIA etc.
Non Annexure I : comprising developing nations like INDIA, BRAZIL CHINA etc.
Under the KYOTO PROTOCOL, the emission of green house gases is measured in
terms of CO2 e or an equivalent of one ton of CO2.
The KYOTO PROTOCOL calls for the reduction of emission of green house gases by
Annexure I parties 5% below the emission level of 1990 and such reduction to be
achieved during the period of 2008 2012 which is the commitment period of such
developed nations.
For this purpose the KYOTO PROTOCOL has provided a market based mechanism
which has resulted in the business of CARBON MARKET through CARBON CREDITS.
Each CO2 e is awarded a unit called the CARBON CREDI and the countries which fall
short of there targets can buy their CARBON CREDITS front the countries which have
exceeded the targets. With this basic principle, there emerges a market for trading in
such emissions known as CARBON MARKET.
This trading has provided flexibility to a country which has not been able to reduce
the emission as per target to buy the CARBON CREDITS from the market and off sets
the shortfall.
The PROTOCOL has introduced three mechanisms as an additional means of meeting
targets for reduction of emissions. These mechanisms are as under:
Emission trading.
Clean Development Mechanism (CDM)
Joint Implementation (JI)
1. EMISSION TRADING
The PROTOCOL allows the developed countries that have emission unit=s to
spare, to sell this excess capacity to another developed country which would
not meet its reduction target. This has therefore, created a new commodity
called Assigned Amount Units (AAU). AAUs can be traded between developed
countries only
2. CLEAN DEVELOPMENT MECHANISM
Under this mechanism, the PROTOCOL allows a developed country to
implement an emission reduction project in another developed country. These
projects can earn emission reductions which are also measured as equivalent to
CO2. This new commodity is known as Certified Emission Reduction (CER). The
developed can buy the CERs for offsetting their shortfalls of emission
reductions

3. JOINT IMPLEMENTATION
Under this mechanism a developed country can implement a project in another
developed country which offers a cost effective and flexible means to fulfill the
obligations under PROTOCOL. The project which is implemented will earn the
emission reduction unit each equivalent to 1 ton of CO2 which is known
Emission Reduction Unit (ERU) and can be traded to fulfill the commitments of
emission reduction targets.
USA has still not ratified the PROTOCOL and is unwilling to do so because it
feels that:
 Entering into agreement to reduce green house gases will be
detrimental to the economy of USA.
It will not enter into an agreement to reduce green house gases
emission that does not require meaningful participation of developing
countries.
More particularly USA wants India & China to accept the commitments for the
reduction of green house gases emission which was not intended by PROTOCOL.
This lack of unanimity among the countries for the PROTOCOL has further created a
market called as Voluntary Emission Reduction (VER).
Some of the countries such as USA which are not committed to the obligation under
KYOTO PROTOCOL for reduction of emission have voluntarily taken up the emission
reduction programme. The projects which feel that they will not pass through the
vigorous approval process of CDM but are involved in the reduction of carbon dioxide
can take benefit under this scheme.

INDIAN CONTEXT OF CARBON MARKET

India is one of the Non Annexure I country to the KYOTO PROTOCOL and thus
participates in the CDM prescribed by the PROTOCOL. Under it the developing
countries get the capital and technology for implementing a CDM project and since
they dont have emission reduction obligation, the CERs earned by them can be sold
to the developed countries. This provides an enormous business opportunity to the
developing countries. Indian is one of the largest beneficiaries under CDM
mechanism.
As the KYOTO PROTOCOL expires on 2012 and still USA is not ratifying the
PROTOCOL, it was essential for the international community to continue the process
of preventing climate change where USA also become the participant the
COPENHAGEN CONFERENCE was therefore held in December 2009 with the objective
to conclude a new bidding PROTOCOL.
The COPENHAGEN CONFERENCE ended without success and disappointed most
countries by noting an accord which says that Annexure I parties should submit
emission targets for 2020 by 31st January 2010 and also wants the Non Annexure I
parties to implement mitigation actions and submit the plans by 31st January 2010 to
the secretariat of the conference for compilation.
Further US wanted China and other major developing countries to accept reduction
targets and verification by USA.
It therefore seems that things have become more complicated as the target of
developed countries itself has jumped by a decade to 2020 and china not accepting
the proposal of US.
THE CONCEPT OF PERSONAL RESPONSIBILITY
If the personal petrol or gas consumption for this year is increased by, say, 1000
liters, this will definitely lead to natural disaster. Nobody will be able to take anyone
to the court as its not possible to prove a direct relation between the increased
consumption of fuels and drought in Africa. But this does not change the fact that
CO2 emission by someones car thus indeed contribute to Global warming.
No doubt that we are responsible for climate change thus we must think a little for
the same and join hands to rehabilitate the scenario before it worsens up because
IF YOU GIVE UP, THEY GIVE UP