Carbon Credit

Quick Introduction to Carbon Credits: All of us must have heard of Green House Gases (GHG) in the recent past. GHG are found in the earth atmosphere and in optimum concentration help to retain heat from the sun, a necessity for life to flourish on our planet. In the last few decades, emissions caused by rapid global developments have caused a massive increase in the amount of GHG in the atmosphere. This is causing the earths atmosphere to retain more and more heat, resulting in global warming. The major sources of GHG emissions are burning of fossil fuels in factories, power plants, automobiles, at home etc. Deforestation is also increasing the concentration of GHG in the atmosphere. The most common GHG is carbon dioxide. It is used as a reference against which harmfulness or global warming potential (GWP) of other GHG is compared. For example, methane, with GWP of 21 has heat retaining ability, which is 21 times that of carbon dioxide. The Kyoto Protocol, which was signed in 1977 and came into force on 16th February 2005, contains a commitment made by industrialized countries to reduce emissions of GHG, in order to retard global warming. Except for Australia and the US, all the major countries are signatories of the Kyoto Protocol. All the rich, signatory countries with significant GHG emissions will be given annual quota for these emissions. Each country can then hand out quotas to individual emitting entities. The ones whose emissions are lower than their quota earn carbon credits (that is, the right to emit one ton of carbon dioxide into the atmosphere), which can be sold to entities that exceed their GHG emission quotas.

Carbon credits can also be earned by using clean technologies that prevent the release of GHG into the earths atmosphere or by taking measures that remove carbon dioxide from the atmosphere (sequestration). The GHG that are currently targeted for carbon credit trading are carbon dioxide, methane, nitrous oxide, and Hydro Fluoro Carbons, sulphur hexafluoride, and perfluoro carbons.

Clean Development Mechanism: This initiative of the United Nations Framework Convention on Climate Change allows companies from developed countries to sponsor projects in developing countries in order to reduce Green House Gases emissions. Successful projects earn Certified Emission Reductions, which can be used as carbon credits. Eligible projects also include renewable fuels.

Carbon Credit Energy Balance: You should quantify total energy fixed and energy used to create Renewable Fuel. Overall efficiencies of Products and Processes should also be considered. It should create more Renewable Fuel than the fuel it uses to create it. Several types of energies are required for creation of Renewable Fuel.

1. Total Primary Energy: All raw materials produced have some energy. Energy is produced in the form of wood of tree, seeds etc. This is the energy released by the complete combustion of the raw materials to produce CO2 and H2O.

2. Feed stock Energy: Energy contained in raw materials that ends up directly in the final fuel is termed as Feed Stock Energy. For BioDiesel production, it includes the energy contained in the Jatropha oil and alcohol.

3. Process Energy: It is the energy required for the processing of raw material into the final product.

4. Fuel Product Energy: This is the energy content of final fuel product. Energy Efficiency: There are two types of efficiencies.

Life Cycle Energy Efficiency = Fuel Product Energy / Total Primary Energy. It is the ratio of final fuel energy and total input energy. One MJ of BioDiesel production requires around 1.2414 MJ of primary energy, with a Life Cycle Energy Efficiency of 80.55%. (For fossil petroleum it is around 83.28%).

Primary Energy Stage MJ per MJ of Fuel Jatropha Agriculture Seed Transport Seed Crushing Oil Transport Oil Conversion BioDiesel Transport Total 0.0660 0.0037 0.0803 0.0072 1.0801 0.0044 1.2414 5.32 0.27 6.47 0.58 87.01 0.35 100 Percentage

Fossil Energy Ratio = Fuel Product Energy / Fossil Energy Inputs. This indicates the extent to which the fuel is renewable. If ratio is 1 or less than 1, then the fuel is not renewable. It should always be more than 1. As it reaches infinity, it is completely renewable. BioDiesel uses 0.3110 MJ of fossil energy to produce 1 MJ of fuel product. Hence its fossil energy ratio is 3.215.

Process Energy : Process Energy required for BioDiesel manufacture is as follows: Primary Energy Stage MJ per MJ of Fuel Jatropha Agriculture Seed Transport Seed Crushing Oil Transport Oil Conversion BioDiesel Transport Total 0.0656 0.0034 0.0796 0.0072 0.1508 0.0044 0.3110 21.08 1.09 25.61 2.31 48.49 1.41 100 Percentage

Accounting for Biomass-derived Carbon: Plants convert CO2 from atmosphere into carbon based compounds by photosynthesis. The time span is very short as compared to fossil fuels. Net effect is that it reduces CO2 present in the atmosphere. Normally the carbon trapped in the oil is considered. No credit is taken from the by-products (glycerine) or waste products (soap) which is about 13%. HIGHLIGHTS OF THE CDM PROJECT ON BIO-DIESEL 1. Scheme

Farmers - 10,000 Working on 20000 Ha of Jatropha plantation Oil Expellers - 1,000 Bio-diesel producers operating in the medium scale capacity i.e. 1 ton per day - 100 Bio-diesel production per year - 30,000 KL CER points generated 150,000. Total money generated = 50 millions @ $ 20 per CER. 2. Modus Operandi We will identify and promote the bio-diesel manufactures and maintain the record of all the other stakeholders and the oil expellers and farmers, buyers, ultimate consumers etc. 3. Sharing Money Distribution to the beneficiaries is proposed as below: 60% to the farmers 10 % to the Expellers 20% to Bio-diesel producers 10% to us for handling charges At above rates A farmer will get nearly Rs.1000/- per hectare per annum. Each expeller gets Rs.5/- per ton & Trans-esterification Plant: Rs.0.33 per liter. Trading in carbon credits: Carbon credits trading started earlier this year in exchanges like the European Climate Exchange (ECX) in the Netherlands and the Chicago Climate Exchange (CCX). Japan is planning to have a carbon credits market for its companies. Another carbon exchange is going to open in Singapore for servicing Asian companies. The prices are always quoted per ton of carbon dioxide fixed, with a minimum contract size of 1,000 tons. The contracts can be traded in the spot as well as future market. Key challenges inherent in the development of markets for carbon offset credits include:
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1. Measurement and verification of carbon storage, which includes the duration of time over which carbon is stored, whether or not it is in addition to baseline storage, and the amount of leakage. i.e., carbon emitted elsewhere through displaced forest activities;

2. Adjusting for uncertainty and for risks that carbon will be released sooner than the contractual period, either intentionally or by accident or neglect, and assignment of liability when this occurs;

3. Development of compatible regulatory frameworks at local, national and international levels that include agreement on what activities are eligible for credits, and who will receive the credits;

4. Establishment of institutional arrangements that reduce transaction costs;

5. Achievement of verifiable socio-economic as well as environmental benefits that strengthen community livelihoods and support sustainable development objectives. In one of the first carbon trading deals in the country, SRF Ltd has forged an agreement with Shell Trading International to deliver 500,000 Certified Emission Reductions by April 2007. SRF Chairman and Managing Director Arun Bharat Ram said the price per ton of carbon dioxide offered by Shell was significantly higher than the prevailing market price of $10 per ton. Bharat Ram, however, refused to divulge the financial value of the deal citing a non-disclosure agreement with Shell. One ton of carbon dioxide reduced through a Clean Development Mechanism (CDM) project, when certified by a designated entity, becomes a tradable CER. SRF's oxidation project, which is expected to reduce nearly 38 million ton of carbon dioxide equivalent over a ten year period, is a CDM Project of the Kyoto Protocol. It is yet to be registered by the United Nations Framework on Climate Change Convention or the UNFCCC. Unlike small and medium enterprises, large companies like SRF are in a better position to negotiate and bargain with buyers of CERs because of their large-scale emissions, said Ram. Buyers can rely on big companies to deliver CERs by 2007, failing which they can be fined up to Euro 100 per ton of extra carbon dioxide emission, he added. The project has received approvals from the designated national authorities in India, Germany and the United Kingdom. The company has
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announced the commissioning of its HFC-23 oxidation plant in Jhiwana, Rajasthan. SRF Ltd is the biggest Nylon Tyre Cord Fabric producer in the country and the eighth largest in the world. Questionnaire for Afforestation / Reforestation (AR) projects under Clean Development (CDM). Question Response Size of land: acres Type of land: Agricultural Location: State: Country: Type of Plantation: Jatropha Duration: Comments

Location (country) of project

Would there be other project participants involved in developing and implementing the project? What is the relationship of your organization to the other project participants or role in the project? Contact details of the relevant local project development personnel who will facilitate the development of the environmental value aspect of the project.

Would there be others involved in /benefiting from the project?

Who is the lead project developer and implementer, advisor; is this the only project developer and owner, etc.? Who owns the land?

Name: Title: Tel: E Mail: Address: o New, large-scale, industrial plantation o Introduction of trees into existing agricultural systems (agro forestry) o Small-scale plantations by landowners o Establishment of woodlots on communal lands o Rehabilitation of degraded areas through tree planting or assisted natural regeneration o Reforestation of marginal areas with native species (e.g. riverine areas, steep slopes, around and between
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Type of project CDM eligible

Multi-component (please indicate which activities would be implemented)

existing forest fragments through planting and natural regeneration) o Establishment of biomass plantation for energy production and the substitution of fossil fuels. Non-CDM eligible project activities o Forest conservation o Improved forest management o Reduced impact logging o Enrichment planting o Multi-component (please indicate which activities would be implemented) Please indicate the total size of the project (ha). Give a description of each planned activity of the project, including species planted, products to be harvested, management regime, area (ha) to be planted and locations. If not enough space is provided here please append on a separate sheet. Please give details on how much carbon is expected to be sequestered by the different project activities (CDM eligible). Indicate calculation methods and data used

Type of project

Size and activities of the project

What are expected carbon benefits (if known)?

What is the present land Please indicate what the present land use and vegetation in the use and vegetation is in the areas of project area? each of the project activities. If any of the areas of the projects Has the project area ever activities have ever been covered by been covered by forest? forest please indicate when this was cleared. When is the project expected to become operational? Are there any political, legal, investment, technological, or cultural barriers that would or could hinder the project implementation? There are no barriers in the implementation of the project. As the local population are very happy with the project due to water conservation, soil conservation and less incidence of pests on other crops.
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What stage is the project in terms of financing What project financing structures are expected (if known)?

Has financing been secured? Y/N Are you currently seeking finance? Y/N Additional Comments:

Has the project received any official sanction?

General Operation: Permits, licenses to operate assurances by host nation, etc. As A Climate Change Project: Host Nation Endorsement/Approval All the environmental impacts are positive. There are no negative factors. However, the income from the plantation is not enough to support the sustainability of this project. Socio-economic impacts are positive. As already explained above, there are no legal barriers in the continuation of this project

What positive and/or negative environmental impacts are expected? What positive and/or negative socioeconomic impacts are expected?