Updates on Means to Check Carbon Emissions & Movement World Wide.
Suhita Mukhopadhyay, Company Secretary
Crackers are common to Diwali nights but there are strict Government curbs on their use to-day. Bursting crackers is a game of hide and seek on Diwali nights. Control of sound pollution is of equal importance. There is total movement world wide to check environmental pollution. Government, the UN, NGOs are all working towards keeping pollution under check. Al Gore, the former Vice President of US, will be more remembered as the joint winner of the Nobel prize winner for peace along with Dr R.K.Pachauri and his team, for his efforts to protect environment, than as Vice President of US who lost the presidential election to President George Bush. Advanced countries are epitomes of properous economy and they achieved economic progress through industrialization with the aid of technology which they protected by taking advantage of the patent laws. They boasted of their achievements and were prepared to conquer weaker economies by controlling industries through the concept of MNCs. But the industrialized countries are caught in the trap of carbon dioxide (CO2) emission.
2. Carbon emission has been earmarked as the single most factor that has affected global climate. This has led to serious environmental imbalance. Floods, earthquakes, disparity in rainfall distribution, drought, lower temperature during winter, abnormal rise in temperature during summer are common today. `Tsunami’ the world over and `Aila’ in the coastal belt of West Bengal are seen to make sudden inroads to cause misery to the people. India experienced uneven distribution of rainfall in the last monsoon season with only parts of Gujarat and Karnataka receiving adequate rainfall. Karnataka and Andhra Pradesh experienced sudden spate of floods. In regions like West Bengal there was little rainfall in the initial months but later shortfall was met. Climate has become unpredictable and patterns are different to-day. Melting glaciers, freak storms and stranded polar bears are the mascots of climate change. The scientific community believes that global climate is warming due to Green House Gas (GHG) emissions for human activities including industrial and manufacturing processes, fossil fuel combustion (gas) and change in land use including deforestation. India accounts for 4.9 per cent of the total world emission compared to 25 per cent by the US, the highest emitter. US annual GHG emissions are about 20 tons per capita. Average citizen in the US emits as much carbon dioxide in a single day as someone in China who does in more than a week or someone in Tanzania, one of the world’s poorest countries, who is said to emit the same tonnage in seven months (Source: International Energy Agency(IEA) ). In 2006, Australia Science Research Agency, CIRO forecasted that sea beds world-wide will increase by 11 to 13 inches by 2100.
3. As a corollary to the Australian forecast, Maldives the small country of atolls in the Indian Ocean has already raised alarm by adopting an innovative style . On 17th October,2009, the President of the country, Mohm-mad Nasheed presided over a meeting at a depth of 20 ft. off the coast in the Indian Ocean just north of Male, the capital. A SOS was framed to the global leaders to save the atoll nation being submerged by the rising seas. The SOS in the shape of a declaration was approved at the 25 minutes Cabinet Meeting. The declaration will be presented at the Copenhagen meet on climate to be held in December, 2009. In another move, Bangladesh and India have decided to fight the threat of the disappearance of the low lying areas of the Sunderbans under the Bay of Bengal. Bangladesh and the State of West Bengal have also decided to fight for the recognition of the Sunderbans as one of the seven wonders of the World. Another incident that has caught international attention is the expedition of Andy Leeman who is on his way to Kolkata to save the Ganga from industrial pollution. Andy Leeman earlier led the expedition on Amazon, Mekong, Orinoco and Zambazi rivers. He is supported by the organization founded by the former Soviet President Mikhail Gorbachev. The expedition is a part of the project called `Rib Expedition and Adventure’. Leeman’s expedition is to draw attention on the impact of climate change vis a vis the sacred Ganges river so important to India. Coping with water stress would be a major challenge in the coming years for the seven world’s rivers including Ganges, Yamuna, China’s Yangtze all originating from the Himalayas. The seven rivers are said to supply water to nearly 40 per cent of the world population.
4. Role of developing countries in meeting the climate change has been in the news in recent weeks, particularly in the wake of the visit by Hilary Clinton to India. Position of India on the issue has been consistent with the principle of common but differentiated responsibility which is a part of the UN Framework Convention on Climate Change (UNFCCC). India is set to renew its efforts in the global climate change negotiations to get recognition for its green efforts and earn credits. For the carbon stocks stored in the country’s forests and trees between 1995 and 2005 have increased from 6,245 million tone to 6,662 million ton, registering an annual increase of 38 million ton of carbon or 138 million ton of CO2. India’s Forest and Tree Cover prepared by the Ministry of Environment and Forest states that India is in the process of becoming a major carbon sink, having increased its forest cover in the last two decades. 2.8 per cent of the total geographical area of the country is covered by forest and trees and considered enough to neutralize 11.23 per cent of the GHG at 1994 level which is equivalent to off set 100 per cent emission from all the energy in residential and transport sectors or 40 per cent of the total emissions from agriculture sector. A mechanism for REDD (reducing emissions from deforestation and forest degradation) which would make industrialized countries pay developing countries for efforts in this direction is already on the table at the United Nation Framework Convention on Climate Change. India can get Rs 6000 Crore every year for its Carbon sink assuming the value of $ 7 per ton of carbon dioxide.
5. India has done remarkablely well in the drive of tree plantation and due to enactment of progressive forestry legislations and framing policies aimed at checking deforestation and aforestation. India has set up a $ 2.5 billion fund for the regeneration and sustainable management of forests. It has an annual budget of $ 1 billion for the above.
6. To fight the bad effects of emission of carbon, the world has developed a mechanism called carbon trading through grant of `carbon credit’. Carbon credits are a key component of national and international attempts to mitigate increase in concentration of GHG. One Carbon Credit is equal to one ton of Carbon. There are two types of Carbon Credits, Carbon Offset Credits ( COC’s) and Carbon Reduction Credits (CRC’s). Carbon Offset Credits consist of clean forms of energy production, wind, solar, hydro and bio-fuels. Carbon Reduction Credits consist of the collection and storage of Carbon from the atmosphere through re-forestation, forestation, ocean and soil conservation and storage efforts. Both approaches are recognized as effective ways to reduce the Global Carbon Emissions crises. The mechanism was formalized in the Kyoto Protocol through an international agreement between more than 170 countries and the market mechanisms were agreed through in the subsequent Marrakesh Accord. The mechanism adopted was similar to the successful US acid Rain Programme to reduce some international pollutants. Since 2005, the Kyoto mechanism has been adopted for CO2 trading by all the countries within the EU under its European Trading Scheme ( EU ETS) with the European Commission as its validating authority. From 2008 EU participants were required to link with other developed countries who ratified Annex I of the protocol, and trade the six most significant anthropogenic GHG. In US and Australia, countries who have not ratified the Kyoto Protocol have initiated similar schemes for consideration.
7. Under an emissions trading system that has evolved, quantity of emissions is fixed ( often called a `Cap’) and the right to emit becomes tradable commodity. The cap (say 10,000 ton of carbon) is divided into transferable units (10,000 permits of 1 ton of carbon each). Permits are often referred to as `GHG Units’ `quotas’ or `allowances.’ To be in compliance, participants of the system must hold a number of permits greater or equal to their actual emissions level. Once the permit is allocated which is done by auction, sale or free allocation to the participants, they are then tradable. This enables emissions reduction to take place where least costly. To be in compliance, participants of the system must hold a number of permits greater or equal to their actual emissions level. Once permits are allocated by auction, sale or free allocation to the participants, they are then tradable. This enables emissions reduction to take place where least costly.
Mechanism of Carbon Trading Market
8. Simplest type of carbon trading involves an entity preparing a contract that describes and specifies the kind of activity they are undertaking to either reduce or offset emissions. The contract may or may not be independently verified, although doing so will increase buyer confidence and probably attract higher price.Contractual commitment is then sold to another entity that wishes to make use of the specificied amount of reduction or the offset.
9. Contractual commitments are usually traded ` over the counter’ (OTC) which means that the trade is usually a bilateral one between a willing buyer and a willing seller without the need for a market to exist. OTC trades are usually single trades where the terms are either partially or fully confidential. OTC markets are relatively simple and operate where there is limited liquidity or where the product being traded is unique in nature for each trade.
10. In contrast, a carbon trading market is more akin to a share market. Products traded on a market generally more homogeneous; for example, all types of carbon sequestration that meet the rules redefining the creation of a carbon sequestration certificate may be deemed to be identical in the market. This increases both liquidity of the product and helps the market participants to understand and develop confidence in the product traded. The existence of a set of enforced rules associated with the creation of both emission reduction and emission offset certificates also increases market confidence in the product.
A. Advantages of Carbon Trading
i). Carbon credit trading can open up a new cash source to entities able to maintain their emission levels well within permissible limits. ii) Overall ecological balance in the atmosphere is preserved.iii) The entity or country gets rewarded for applying clean technology in its production process. iv) It leads to better corporate and social image leading to public approval. V) It propagates activities including sapling plantation which help to reduce soil salinity, improve water quality and enhance bio-diversity.
B. Key Risks and Uncertainties
Key risks and uncertainties associated with carbon trading markets are:
i) Extent to which Kyoto Protocol guidelines are implemented and followed. Ii) Attitude of US which is the biggest polluter and Australia a major emitter in ratifying the Kyoto Protocol. iii)Rules and decisions relating to the emissions trading market. iv) The first Kyoto commitment period ending on 31st December,2012, is set to be dominated by EU ETS and CDM markets and is set to see cumulative volumes and value, as they are consolidating and getting sophisticated. Additionally, the next five years will experience the Joint Implementation market deliver its first credits and possibly an emerging market in national Kyoto allowances or AAUs .
11. After the UN talks at Bangkok in early October, nations are looking forward to the Copenhagen summit in December. All is not well as there is resentment all round with some are voicing the striking down the Kyoto Protocol. With the agreement under attack, the Copenhagen meet seems to be in trouble. Activity has now shifted to political effort to attain an outcome at the December meet. Focus is on arriving at an understanding on financing and technology. Climatic change experts are of the opinion that only a political understanding can get the negotiations on track. In Bangkok, the developed resented against the Kyoto Protocol so progress in the above fronts are doubtful. However, before the Copenhagen meeting 17 major economies are meeting at London to arrive at an understanding on the issue of financing and reduction of GHG. Pressure is also on the US to finalise its stand. The US representative, Mr Todd Stern has made it clear that there is a need to bring countries like China, Brazil, South Africa and India under the umbrella of an internationally binding agreement. This demand is, however, not accepted by the countries. Later in the month EU will be meeting to find a solution to the issue of finance. On the technology front, India is getting ready to issue a political statement after the end of the high level conference, Climate Change: Technology Development and Transfer, scheduled shortly. The conference expects to come up with a declaration on technology and climate change which will be the official declaration of India to be taken forward to the ensuing Copenhagen meet.
12. Meantime, a Delhi High- Level Conference on Climate Change was held on 22nd and 23rd October,2009 at Delhi. On the concluding session, Mr Jairam Ramesh, Environment & Forest Minister summarized the proceedings of the conference by saying that “ the quickest way of lowering the cost of may renewable options is to scale up their rate of deployment and diffusion in developing countries.” The `High Level Conference of Technology Development and Transfer’ adopted a `Delhi Statement’ which also called for increased public finance in technology development. The conference was attended by 58 countries. The Danish representative, Ms Connie Hedegaard drew attention of the delagates by saying that the adaptation and mitigation efforts to tackle climate change would require three digit billion dollars. The conference was of the opinion that there was a need for a “ green technology accelerator” that would help the world to shift away from its dependence on fossil fuel. It was felt that the global warming threat was to be tackled by a collaborative approach to ensure the Copenhagen meet on climate change in December not to settle for a deal that is ineffective. The conference expressed solidarity with Maldives which has drawn world attention on its possible disappearance under the Indian Ocean.
13. Simultaneous with the conference the Union Government also approved the National Policy on Disaster Management. The policy aims at providing relief to the affected persons due to disasters which are very common these days. It is indeed a step towards adaptation to the emerging threats that might shake the country in the days ahead.
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