Project Report On

STUDY OF CARBON CREDITS

SUBMITTED BY

PANKAJ M BHUTRA
MMS FINANCE BATCH: 2007-09

SUBMITTED TO

PROF. P. L. ARYA

UNIVERSITY OF MUMBAI

N. L. DALMIA INSTITUTE OF MANAGEMENT STUDIES & RESEARCH

CERTIFICATE
This is to certify that Mr. PANKAJ M BHUTRA, student of N.L. Dalmia Institute of Management Studies and Research, has successfully carried out the project titled STUDY OF CARBON CREDITS, under my supervision and guidance as partial fulfilment of the requirements of MMS course, Mumbai University Batch 2007-2009

Prof. P. L. Arya
Project Guide

Prof. P.L. Arya

Director

Date: Place: MUMBAI

ACKNOWLEDGEMENT
THE SUCCESS OF ANY PROJECT IS THE RESULT OF HARD WORK & ENDEAVOR OF NOT ONE BUT MANY PEOPLE AND THIS PROJECT IS NO DIFFERENT.

I TAKE THIS AS A PROSPECT TO AVOW THAT IT WAS AN ACHIEVEMENT TO HAVE SUCCEEDED IN MY FINAL PROJECT, WHICH WOULD NOT HAVE BEEN THE POSSIBLE WITHOUT THE GUIDANCE OF PROF. P. L. ARYA (DIRECTOR N. L. DALMIA INSTITUTE OF MANAGEMENT STUDIES & RESEARCH) MY PROJECT GUIDE FOR HIS VALUABLE CONTRIBUTION TOWARDS THE PROJECT.

I ALSO EXPRESS MY APPRECIATION AND GRATITUDE TOWARDS ALL THE FACULTY MEMBERS AT N.L. DALMIA INSTITUTE OF MANAGEMENT STUDIES AND RESEARCH FOR MAKING THE M.M.S. DEGREE AND THIS PROJECT A MEMORABLE LEARNING EXPERIENCE.

FINALLY I AM THANKFUL TO ALL MY FRIENDS, FACULTY MEMBERS AND STAFF WHO HAVE GIVEN THEIR FULL SUPPORT IN COLLECTING THE REQUIRED INFORMATION AND CONTINUOUS HELP DURING THE PREPARATION OF THE PROJECT.

PANKAJ M BHUTRA MMS FINANCE

CONTENT TOPIC Introduction Evolution of Carbon Credit Carbon Credit Trading Mechanism Sectors to Benefit Accounting of Carbon Credit Carbon Financing Current Global Trends Carbon Credit and India Conclusion Bibliography PAGE NO 2 5 10 16 19 22 31 35 39 40

INTRODUCTION

"M o s t

people would consider the following past societies to have been famous victims of full-fledged collapses rather than of just minor declines: the Anasazi and Cahodia within the boundaries of the modern US, the Maya cities in Central America, Moche and Tiwanaku societies in South America, Mycenean Greece and Minoan Crete in Europe, Great Zimbabwe in Africa, Angkor Wat and the Harappan Indus Valley cities in Asia, and Easter Island in the Pacific Ocean. It has long been suspected that many of those mysterious abandonments were atleast partly triggered by ecological problems: people inadvertently destroying the environmental resources on which their societies depended. This suspicion of unintended ecological suicide-ecocidehas been confirmed by discoveries made in recent decades by archealogists, climatologists, historians, paleontologists and palynologists (pollen scientists). The process through which past societies have undermined themselves by damaging their environments fall into eight categories, whose relative importance differs from, case to case: deforestation and habitat destruction, soil problems (erosion, salinisation, and soil fertility losses), water management problems, over hunting, over fishing, human population growth, and increased per capita impact of people. The risk of such collapses today is now a matter of increasing concern."

Jared Diamond (2006).

Global warming is the new buzzword haunting environmentalists all over the world. According to UNFCCC, since the 19th century, the average temperature of the earth has increased by 0.6 C. The average temperature is believed to be rising and to increase by another 1.4 to 5.8 C till the year 2100. The primary reason for this increase is rapid growth of industrialization, burning of great quantities of gasoline, coal and oil, urbanization and cutting down of forests and certain methods of farming. These activities have lead to an increase in the Greenhouse Gases (GHGs), especially carbon dioxide, methane, and nitrous oxide, etc. These gases are necessary in the atmosphere to absorb the heat of the sun; and without them, the earth's atmosphere would be uninhabitable, cold and barren. However, an excess of these gases in the atmosphere leads to the phenomenon called global warming which leads to an artificial and unnecessary increase in temperature which ultimately alters the climate on the planet.

Sources of Green House Gases: Burning of fossil fuels and deforestation leading to higher carbon dioxide concentrations. Livestock enteric fermentation and manure management, paddy rice farming, land use and wetland changes, pipeline losses, and covered vented landfill emissions leading to higher methane atmospheric concentrations.

Use of chlorofluorocarbons (CFCs) in refrigeration systems, and use of CFCs and halons in fire suppression systems and manufacturing processes. Agricultural activities, including the use of fertilizers that lead to higher nitrous oxide (N2O) concentrations.

Composition of Green House Gases:

The Dangers of Global Warming: Extinction of many species of plants and animals. Frequent storms, droughts and floods. For instance Rajasthan is facing floods while eastern India is facing draughts. This type of a drastic climatic change is attributed to global warming by many environmentalists. Global warming causes the waters in the oceans to expand which can cause havoc and destruction for low lying and island countries. Rise in temperatures can also cause glaciers to melt, which will ultimately add more water to the oceans. The average sea level has been increasing every century. It has been predicted that an increase of 9-88 cm may take place in the 21st century. Agricultural produce is likely to decrease in tropical, subtropical and temperate regions because of the increase in temperature because of soil erosion and deforestation.
4

EVOLUTION OF CARBON CREDIT

UNFCCC Some nations have made voluntary efforts towards controlling these GHGs, but they are not enough and not proportionate to the increase in GHGs in the atmosphere. Hence, the United Nations Framework Convention on Climate Change (UNFCCC) came into effect. Under the aegis of the UNFCCC, 189 countries around the world have joined an international treaty that sets general goals and rules for confronting climate change. The Convention has set an ultimate objective of stabilizing GHG emissions "at a level that would prevent dangerous anthropogenic (human induced) interference with the climate system." It states that "such a level should be achieved within a time-frame sufficient to allow ecosystems to adapt naturally to climate change, to ensure that food production is not threatened, and to enable economic development to proceed in a sustainable manner." The "base year" for tabulating GHG emissions has been set as 1990. Hence all the member countries have to work towards bringing the pollution levels below the levels which existed in 1990. Those countries which have already ratified the treaty are called "Parties to the Convention". These countries will strive towards reducing GHGs from their atmosphere by giving impetus to technology for efficient energy utilization and power production, agriculture practices which prevent soil erosion, conservation and optimal use of natural resources, etc. These countries have started developing programs for slowdown of environmental change. Those nations which are highly industrialized cannot of course be expected to cut down their industrial activity drastically. Hence they have agreed to support the developing and underdeveloped countries in the reduction of climate change. They extend their support financially, through a system of loans and grants set up by UNFCCC. These countries also share technology with the less developed countries.

Kyoto Protocol Owing to the increased awareness about the need of pollution control, an international agreement took place among several nations of the world. This agreement is known as the Kyoto Protocol. Representatives of different countries came together in Kyoto, Japan, to bring a solution to the rising pollution problem. The Kyoto Protocol was implemented in 1997, whereby emission targets were determined for countries, and key elements as to the achievement of such targets were identified. It is basically the agreement in which the member as well as non-member countries have decided to reduce the emission of six GHGs to a certain level and decided to provide credit for reduction in emission. The Kyoto Protocol is an international treaty to reduce GHGs emissions blamed for global warming. The protocol came into force on February 16, 2005. The treaty was concluded in Kyoto, hence the name. The main aim of the agreement is to reduce global warming. As mentioned earlier, global warming causes unwanted and harmful climate changes. Reduction in global warming can delay this climate change. Global warming can be controlled by reducing the emission of GHGs. Hence, an understanding was reached under the purview of the treaty, wherein developed and transition economies are supposed to reduce total GHG emissions to 5% below the level they were in 1990s. This has to be achieved between 2008 and 2012 (the first commitment period). The protocol is lead by the United Nations and different countries have different targets which they have to achieve. Only countries that ratify the protocol are bound by it. The Kyoto Protocol along with a host of other organizations such as the United Nations, EBRD (European Bank for Reconstruction and Development), etc. have helped create a market for Carbon Credits. The whole mechanism can be simply understood like this: Those businesses or countries which cause less pollution are given benefit of Carbon credits. These carbon credits can be sold to those businesses or countries which have high pollution levels. Countries in Russia, Eastern Europe and Central Asia are highly energy-efficient and hence they can benefit from the protocol by reducing energy costs and emissions.

The Kyoto Mechanisms 1. International Emissions Trading: Emissions trading (ET) is a mechanism that enables countries with legally binding emission targets to buy and sell emissions allowances among themselves. Each country has a certain number of emission allowances (amount of carbon dioxide it can emit) in line with its Kyoto reduction targets. The IET allows industrialized countries to trade their surplus credits on the international carbon credit market. Emissions trading transfers "assigned amount units" or AAU T h e b u y e r w i l l t h e n u s e t h e c r e d i t s t o m e e t t h e i r e m i s s i o n s targets

2. Joint Implementation (JI): Projects between industrialized nations to earn emission offsets A developed country or a business house in a developed country can set up a project that reduces emissions in another industrialized country for which it will gain credits. It is done because of geographical or cost implications Emission reduction units (ERUs) created through joint implementation is treated in the same way as those from emissions trading The government of the investing company gets benefited by sale of these credits and the recipient country gets the benefit of foreign investment.

3. Clean Development Mechanism (CDM): The purpose of CDM is reduce to emissions and also contribute to sustainable development in developing countries.

The CDM is administered by the CDM Executive Board (CDM Board) which reports and is accountable to the Conference of Parties (COP). A Carbon emission reduction (CER) is given by the CDM Executive Board. One CER is equivalent to one tonne of carbon dioxide reduced. Steps involved for issuance of CER: The first stage is at the domestic level, where the project gets approved by National CDM Authority (NCM). After NCM's approval, the project is sent to the United Nations Framework Convention on Climate Changes. After this, the project is reviewed by the executive board of UNFCCC. The project gets evaluated on every front and is then registered under UNFCCC only if it meets all the norms. Thereafter, certification is done for the reduction in emission and credits are issued. Objectives of Kyoto Protocol: Enhancement of energy efficiency. Protection and enhancement of sinks and reservoirs of GHGs. Promotion of sustainable forms of agriculture in light of climate change considerations. Research on, and promotion, development and increased use of, new and renewable forms of energy, of carbon dioxide sequestration technologies. Progressive reduction or phasing out of market imperfections, fiscal incentives, tax and duty exemptions and subsidies in all GHG emitting sectors. Reduction of methane emissions through recovery and use in waste management, as well as in the production, transport and distribution of energy.

Carbon Credit Carbon credit is the evolving concept derived by public and private entities. Mahdi Al-Kaisi, professor of Biosystems in his article defines the concept of carbon credits as that "Which involves buying carbon units which are emitted, mainly in tons, through a middle entity carbon sequestration through adoption of a range of conservation practices. The carbon units are then sold to a buyer that is the industrial sector needing to offset the CO2 generated to the atmosphere through their manufacturing activities." Carbon credits encourages those countries by rewarding their efforts in reducing GHG emission. That is, if a country earns one credit it means it has reduced one tonne of CO2 emission into the atmosphere. These credits provide financial incentives to those companies which systematically develop renewable energy projects. The survey on the carbon emission with due reference to the expenditure incurred by different countries of the world reveals that developed countries are spending nearly $300 to 500 and the developing countries are spending $10 to 25 every year. In countries such as India, GHG emission is very low to the target fixed by Kyoto Protocol and so, they are excluded from reduction of GHG emission. However, the trading takes place in selling surplus credits to the developed countries. Thus, India claims 31% of the world carbon trade through Clean Development Mechanism (CDM). Carbon credits are also called as "cap & trade regimes". The companies emit a set amount of CO2 in the given time period and endeavor in emitting less than that fixed by Kyoto protocol. Though this they can sell their credits for money to those companies which are unable to control emission within the capped level. Today's world is a trader's paradise, wherein everythingtangible and intangibleis tradable, and in absolute terms, the latest offering is pollution.

CARBON CREDIT TRADING MECHANISM

Types of Transactions Carbon transactions can be grouped into two main categories: Allowance-based Transactions: Here, the buyer purchases emissions allowances created and allocated (or auctioned) by regulators under capand-trade regimes, such as Assigned Amount Units (AAUs) under the Kyoto Protocol, or EUAs under the European Union Emission Trading Scheme. Project-based Transactions: In these transactions, the carbon credits that are bought, are generated from projects that help in reducing GHG emissions, for e.g., the projects which come under the purview of CDM and JI framework.
10

The trading takes place on two stock exchanges, the Chicago Climate Exchange and the European Climate Exchange. Western European countries and Japan are the major buyers of carbon credits. The hazardousness of each GHG can be compared using the Global Warming Potential (an index under the Kyoto Protocol). Buyers Figure 2 shows the buyers of carbon credits from January 2005 to March 2006.

From Figure 2 it is clear that buyers from Europe and Japan largely dominated the market scene. Significant purchases were also seen from Scandinavian countries.

11

Sellers Figure 3 shows sellers of carbon credits. Asia forms 73% of the total transactions, however, the share of India is observed to have decreased significantly from that in 2004. This can be attributed to the fact that most companies decided against selling of Carbon Credits this year, in order to accumulate them and get a better price for a chunk later on. Some companies decided against selling CCs in the anticipation of getting better prices in future when the demand is more.

12

Nowadays, several companies are looking at emission trading as a key part of their environment strategies. An emission trade typically occurs when a company which wants to reduce its emissions, purchases emission credits from another company that has already reduced its emissions beyond its specified requirement. This transaction can benefit both participants. Purchasers are able to reach goals that require emission reductions cost-effectively without undergoing massive overhaul of plant, machinery and processes and spending more on operational changes. Sellers are rewarded financially for their investments in emission reductions. A country (or a group of countries) caps its carbon emissions at a certain level (this is known as cap and trade) and then issues permits to firms and industries that grant the firm the right to emit a stated amount of carbon dioxide over a time period. Firms are then free to trade these credits in a free market. Firms whose emissions exceed the amount of credits they possess will be heavily penalized. These permits can also be traded on various carbon trading exchanges like Chicago Climate Exchange (CCX). The CCX was the first carbon exchange when it opened in 2003. Today, it is the only exchange of its kind in North America. In Europe, big producers of greenhouse gases are required to take part in emission trading. The CCX owns the European Climate Exchange (ECX), in the Netherlands. A carbon exchange is like a stock exchange for pollution. The carbon exchange provides a market for businesses to trade on the release and capture of carbon dioxide and other greenhouse gases. Trading takes place when members release less than their limit. The idea of trading in greenhouse gases has its roots in the Kyoto Protocol. Market forces drive the price of the credits. The credits are called carbon financial instruments (CFIs). Each credit is equal to 100 metric tons of carbon dioxide, the most common greenhouse gas. In this way, the desired carbon reductions are met at the lowest cost possible to society. In addition, a few large companies have developed internal trading mechanisms in order to reach companywide goals cost-effectively. For example, the energy majors, British Petroleum (BP) started an internal emission trading system and sought third-party verification of GHG inventory way back in 2000. Similarly, Shell too started its internal trading emission scheme, the Shell Tradable Emission Permit System (STEPS), also in 2000.
13

Shell wanted to use the scheme as an aid in reaching the company's emission reduction targets, allowing permits worth 100 tons of carbon dioxide (or its methane equivalent) to be traded via an internal website. The trading takes place on two stock exchanges, the CCX and the ECX. Japan and Western European countries are the major buyers of carbon credits. The Scandinavian countries also play a major role. One significant fact to be noted here is the growth of private players. The share of private players increased from 80% to 90% at the beginning of 2006. As far as sale of carbon credits is concerned, Asia accounts for 73% of the total transactions. However, according to the World Bank Report, State and Trends of the Carbon Credits, 2006, the transactions by India decreased significantly from that in 2004. This can be attributed to the fact that most of the companies decided against selling carbon credits, in anticipation of a future appreciation of prices. The Global Warming Potential, an index under the Kyoto Protocol, is used to compare the hazardousness of each GHG.

Figure4

14

Drawbacks A CER contract (as opposed to an issued, delivered CER) has certain risks inherent with it: - A CER does not legally exist until it is issued; its volume depends on project performance (and verification), actual issuance, and its delivery into the compliance buyer's registry requires that the International Transaction Log is operational; - Once it is delivered into a buyer's account in the CDM registry, it loses its ability to be transferred across borders prior to 2008. - Another drawback in project-based transactions is that it involves higher costs and time as implementation of a planned project in not as simple as it appears on paper. Delays in implementation can lead to a disarray of the cost benefit planning. Markets created by binding constraints: - The reason the carbon markets grew in 2005 was due to the binding constraints of Kyoto Protocol, EU ETS, etc., and the legally binding voluntary commitments under the Chicago Climate Exchange. - The market demand is determined by the assigned emission units of each country. These caps have to be set realistically, or the whole market may have too face a demand pull inflation in cost of carbon credit. - It is important that the main objective of UNFCCC and the Kyoto Protocol is (reduction of GHG emissions and global warming) kept in mind by the buyers and sellers. If the whole trade becomes too profitoriented, then it will lose its central focus. Emergence of market institutions - The emergence of viable market institutions is usually a sign of a market's maturity. In this regard, the carbon market is considered to be still in its infancy. Thus, carbon markets need to become institutionally and geographically stronger which will result in fairer pricing of carbon credits and generate a transparency in the system.
15

SECTORS TO BENEFIT
1. Agricultural Sector Within the agricultural sector, credits may be generated in two ways: Reduction of GHGs: Reduction of GHG emissions from fossil fuels, fertilizers and livestock on farms. Removal of GHGs: Forming biological absorbing the CO2 into terrestrial processes. sinks; and through them,

However reduction and removal of GHGs should be in compliance with the Kyoto Protocol: Credits should be given based on net atmospheric reductions, which means that, there should be a net reduction of GHG emissions. Reduction or removal in one GHG should not lead to an increase in another GHG. The reduction needs to be in addition to what would have occurred in a business as usual situation. Efforts to remove or reduce GHG emissions cannot result in increased emissions elsewhereeither in space or time. 2. Forestry Afforestation : establishing trees on previously unforested land. Reforestation: the process of replanting forests where they once existed but were destroyed in the past Forests that Qualify for Carbon Credit The Kyoto Protocol recognizes forests as carbon sinks and provides for carbon trading as a means of offsetting emissions of GHGs and meeting the Kyoto targets.

16

Under the protocol, carbon sequestered in trees (i.e. carbon credit) must come from 'Kyoto Forests', which are new forests, that are: Planted on land, which historically has not been covered by forest (afforestation). Planted on land which historically had contained forests that had been destroyed in the past and the land had been used for other purposes. Eligible forsets should be ones which were not planted before 1990, i.e., they have to be new forests; and secondly, must arise from a change in the use of land. Another condition is that carbon sequestered by forests during 2008-2012 alone is tradable. 3. Renewable Energy The renewable sources of energy include: Wind power, Solar energy, Biomass power, Hydel power, Geothermal, and Tydel Power. Energy Supply Renewable energy (eg., windmills, biogas, solar energy generation). Biomass (heat and/or power) and cogeneration. Improving energy efficiency by replacing existing equipment (installing new efficient machinery). Fuel switch: Fuel switching from fossil fuel to green fuel like biomass, rice husk, etc.
17

 Energy efficiency measures related to boiler, pumps, turbines, installation of various speed drives, efficient cooling systems, back pressure turbines, etc. Cogeneration in industries having both steam and power requirements. 4. Transport Fuel switch from gasoline and diesel to natural gas. Modal shift from air to train, road to train at macro level. Replacement of shipment of certain raw materials through road to pipelines. 5. Waste Management Capture of landfill methane emissions to generate power. Utilization of waste and wastewater emissions for generation of energy for captive use of power generation.

18

ACCOUNTING OF CARBON CREDIT Accounting Issues The mechanism of carbon trading is similar to the US Acid Rain Program which reduced some industrial pollutants but had the following multifarious accounting dimensions. What are the costs and revenues involved in it and how they are to be identified, measured and reported for better decision-making? What is the financial and operational effect of carbon credit and its trading on the capital expenditure and earning of the institution in the current year and on future periods? How to amortize the capital expenditures? How to treat additional expenditure incurred on required training, research and development? How to identify, measure and disclose the process, product, fiscal benefits of earning carbon credit on environments? What should be the auditable system, i.e., auditable documents, composition of audit team and reporting by auditors as a part of statutory report or otherwise reporting separately? How to recognize the effect of carbon credit and its trading on conventional accounting practice and framing accounting policies accordingly? What should be the code of good corporate governance in carbon trading? Accounting and Reporting Accounting refers to the measurement of economic events summarizing and reporting them in the form of financial statements. and

19

Increased GHG emission has brought with it many challenges and opportunities and also put greater focus on the role of accounting profession for accounting and reporting of carbon credits and their trading. The profession, today, is facing an important challenge of implementation of an appropriate model of regulation and the achievement of international convergence in accounting, reporting and auditing of carbon credit and its trading so that relevant and reliable financial information are available for use by various stakeholders, bankers, debtors, creditors, etc. In this context, the requirement is to identify the role of accounting in measuring economically the carbon credits and preparing financial statements in compliance with GAAP. It should use methodology that is well-defined, constantly applied and auditable. The institutions are required to maintain written documents for all the transactions and financial statement. This methodology should be reviewed and upgraded from time to time based on the new findings. Major perceived thrust point for accounting, auditing and reporting of carbon trading and its trading have already been listed above. The following methodology has to be followed for carbon credit trade accounting. The separate methodology of accounting is to be adopted for self-generated CERs and purchased CERs. The CERs (self-generated) should be initially recognized at fair value through profit or loss accounts. The acquired/purchased CERs for availing carbon credit should be initially recognized at fair value plus transaction costs that are directly attributable to it. CERs if acquired out of government grant are initially recorded at fair value plus transaction costs that are directly attributable to it minus government grants. It is difference of initial recognition and recognition on balance sheet date and are charged to profit and loss account. In this, AS28 is automatically complied.

20

 On balance sheet date, CERs initially recorded at fair value plus transaction costs that are directly attributable to it, are to be again measured at fair value without any deduction for transaction cost it may incur on disposal and any gain or loss arising out of initial and subsequent measurement should be charged to revaluation reserve account. However, when there is objective evidence those CERs are impaired, the cumulative loss that has been recognized in revaluation reserve account should be removed and recognized in profit and loss account. On disposal, gain or loss of CERs initially recognized at fair value through profit or loss accounts should be charged to profit and loss account of that period. On disposal, cumulative gain or loss of CERs initially recorded at fair value plus transaction costs that are directly attributable to it are charged to profit and loss account after routing it through revaluation reserve account. The sale proceed of CERs should not be clubbed with turnover and have to be shown separately in profit and loss account. Disclosures Disclosure is required in notes on accounts that procedure adopted for measurement and recognition of profit or loss either through P&L account or through revaluation reserve account Disclosure is similarly required for measurement and profit or loss recognition of acquired/purchased CERs. Disclosure is required in notes on accounts for restriction if any imposed on trading of CERs by some authority.

21

CARBON FINANCING The growing sense of urgency among countries worldwide to combat the impending catastrophic effects of global warming has paved the way for the birth and growth of a multimillion dollar international market for carbon emission trading of buying and selling Greenhouse Gases (GHGs). As a non-Annex I country with approximately 12% market share in the total number of contracts signed so far in the world market, India has bright scope as its carbon market is largely driven by Clear Development Mechanism (CDM) opportunity. The Federation of Indian Chambers of Commerce and Industry (FICCI) expects Indian companies to earn $4 bn through carbon credit sales in the near future. The consulting firm Ernst & Young has reported that since its takeoff nearly two years ago in India, domestic companies have earned close to $500 mn from carbon credit sales. According to the World Bank India Newsletter (January 2008), carbon market is the fastest growing market in the world. The volume of carbon credits traded by developing nations doubled between 2003 and 2004 and tripled between 2004 and 2005. In 2006 alone, global carbon transactions worth $30 bn were conducted. What is carbon financing? Carbon financing is the term used for carbon credits to help finance GHG reduction projects where industrialized countries can make up for their carbon reducing obligations under Kyoto (industrialized countries collectively agreed to reduce GHG emissions by 5% by 2012 compared with 1990 levels) through purchase of emission reduction credits from projects in developing countries. Carbon trade offers double benefits: first, encouraging companies to cut and reduce their GHG emissions by penalizing those who do not adhere to Kyoto norms and rewarding those who conform; and, second, making available the investment and expertise of low-carbon technologies to poor countries, though many of the poorest countries are yet to reap the benefits. Under Kyoto Protocol, governments are separated into two general categories: developed countries, referred to as Annex I countries which have GHG emission reduction obligations and developing countries, referred to as non-Annex I countries which have no GHG emission reduction obligations but may participate in the CDM.
22

Failure on the part of any Annex I country to meet its Kyoto obligation will incur penalization resulting in submission of 1.3 emission allowances in a second commitment period for every ton of GHG emissions in excess of cap in the first commitment period (2008-2012). Annex I countries can purchase GHG emission reductions from financial exchanges, from CDM projects of non-Annex I economies, from other Annex I countries under the Joint Implementation (JI) or from Annex I countries with excess allowances. When non-Annex I countries with no GHG emission restrictions undertake GHG emission reduction projects under CDM they receive carbon credits which can then be traded/exchanged with Annex I countries in the world market. Both the Annex I and non-Annex I economies have established designated National Authorities to manage their GHG portfolios under Kyoto, actively promoting government carbon funds and working closely with their major utility, energy, oil and gas, and chemical conglomerates to acquire GHG certificates. Banks enter the fray Domestic banks such as ICICI, IDBI, HDFC and SBI are gearing up to tap this new high-risk and high-reward business of carbon financing, where the margins are quite lucrative in the range of 1-3%, higher than for other projects. Citing the nature of deals as one of the reasons for the growing opportunity in carbon financing, K Uma Maheshwaran of Carbon Procurement Unit, GTZ International Services, said, "In China, European companies buying carbon credit enter into agreement at the beginning of the project and also provide finance for project development. But in India, since the project size is small, many companies are seeking finance from financial institutions." The global carbon trading market is unique in the sense that the sellers are from India or other developing nations, while the buyers are from industrialized countries. The objectives of both the parties are quite contrary; while buyers want carbon credits at cheaper rates, sellers want to maximize the value. Being unknown to each other, they will be carrying preconceived notions and misgivings about the genuineness of the contract. This is where banks have a pivotal role to playact as financiers of emission reduction projects and bring together buyers and sellers on a common platform through credit mechanisms.

23

Letter of Credit (L/C) is one such financing mechanism, where a buyer guarantees payment through his banker for goods received from the seller. L/C is an assurance to the seller that he will receive the payment and the same can be availed through an escrow account with the bank. This apart, carbon delivery guarantee is another mechanism through which banks provide guarantee to the buyers of carbon credits that the same will be delivered by sellers as per the terms of the contract (quantity, delivery schedule, etc.) This enables buyers and sellers to enter into long-term future contracts. Banks can thus tap the investment potential of receiving huge amounts by way of advances to these projects from overseas buyers. Apart from financing CDM projects and providing loans against carbon credit receivables, banks offer a single point delivery of services such as advisory services, value-added products like securitization of carbon credit receivables, delivery guarantees, escrow mechanism, etc., to their customers. Many banks have joined the carbon credit bandwagon; for instance, SBI in September 2007 entered into MoUs with MITCON Consultancy Services Ltd., Ecosecurities India Private Ltd., and Cantor CO2e India Private Ltd. to provide one-stop destination to industries for CDM projects and emissions trade. It has also recently entered into an MoU with KFW (a German firm) carbon fund for jointly exploring financing of sustainable CDM opportunities in various development and industrial sectors. The bank has also cleared one such loan valued at Rs 8 cr, against the receivable to a biomass-based power plant in Indore. Also in the offing are 3-4 such loans pending clearance which will be considered once they complete purchase agreement formalities with their buyers. ICICI Bank has signed a $200 mn line of credit from Japan Bank for International Cooperation (JBIC) to fund carbon credit-related projects. It has also signed an MoU with Agrienergy Consultancy (the Indian arm of the UK-based consultancy, Agrienergy Ltd.) to promote carbon credit business in the country. Under this bilateral arrangement, they propose to offer a large spectrum of CDM-related services to government bodies, SME units and other services. Agrienergy's services will include participation throughout the carbon credit project cycle, right from assistance to clients in identification of CDM projects, their registration with UN Executive Board.
24

ICICI will provide services in the areas of commercialization of Certified Emission Reduction Certificate (CERC), coordination and banking services and debt-financing of CDM projects. The bank is also working with SMEs for carbon credit market and has formed specific vertical team to tap opportunities arising to Indian SMEs from climate change and carbon credits. By adopting a multi-pronged approach, it has tied up with consultants to offer advice to its clients on carbon credit linked projects, energy conservation, etc. Besides, the bank is also planning to create an energy efficient awareness program for their clients. Similarly, IDBI has set up special desk offering end-to-end solutions to corporates of carbon credit business. The bank has certain tie-ups for technical and financial assistance, and the products developed include providing guarantees for carbon deliveries and escrow services for payment. Going a step further, both ICICI Bank and IDBI Bank have plans to form alliances, "We have formed a dedicated team for carbon credit. Efforts are also taken to forge alliances for this initiative. The bank has launched `Go Green'a program which gives SMEs an opportunity to reduce their carbon footprint," said Sanjeev Mantri, GM, Small Enterprises Group of ICICI Bank. Risk-reward trade-off High and varying degrees of risks are associated with carbon credit financing depending on the nature of the project and the level of its financing. According to Somak Ghosh, Group President, Corporate Finance & Development Banking, Yes Bank, there are several project specific risks which include underperformance, capital/operational costs overrun, currency risks caused by inflation and market risks such as the insolvency of counterparty, and banks need to develop proper financing mechanisms factoring in the unique risks presented by CDM projects. In India, despite huge potential, the initiative taken by banks to fund carbon finance projects is moving at a snail's pace, further aggravating the risk factors for new financial institutions which are entering the carbon market. According to Timothy Patrick Fox, Carbon Finance Expert, Institute for Financial Management & Research, "Financial institutions will be forced to carry a higher component of risk with a diminished rateof-return due to higher capital costs and will require careful evaluation of projects."
25

However, "there is a huge potential in financing carbon credit-related projects," says BK Batra, Chief General Manager, IDBI. He opines that carbon trade provides scope for other businesses like technology transfer, capital investments, cross-border funding products and remittances. Apart from generating high margins that include commission, brokerage, etc. from the carbon credit transactions, banks cite broadening of the product portfolio as key incentive to enter this market. The project enables banks to provide an international platform for buyers and sellers and increase the scope of allied business. PV Anantha Krishnan, Executive VicePresident and Country Head, HDFC Bank, observes, "Financing of CDM projects becomes an extension of banking services that we provide to retain our customers." However, Batra cautions that there is high risk involved since the market is future-based and, as with any business, returns are commensurate with risks. "The risks include projects not being implemented in the manner they were envisaged or not being able to generate estimated CER revenues and even the uncertainty of prices crashing," reckons he. Banking sector experts opine that trading in carbon products is completely different from the regular participation in financial markets as the characteristics of market participants differ in both these trades. This is due to the vast volume involved and lack of staff with sufficient expertise to evaluate the projects, as also a number of risks at various levels of the project finance cycle. Novel financing instruments, such as special purpose vehicles, CDM bonds, etc., can be developed with efficient and transparent procedures. Regulatory risks at central and state levels form the core element of commercial risk which can be overcome with effective approval rules. The other risks include failure of technology, procedural delays, political risk, credit risk, negligence in dealing with carbon instrument delivery risk, etc. Balancing the riskreward trade-off forms the crux of carbon financing. Financing projects that are not supported by strong balance sheet pose significant challenges and entail additional risks, such as operational risk, price risk, default risks, project registration risk, execution risk, policy risk, etc., observes Mantri. He adds that banks can earn good returns by their involvement and total participation in the project right from financing to CDM registration to trading of the issued carbon credits.

26

Another hurdle is the exchange risk. While banks can apply hedging tools for forward contracts involving huge amounts to mitigate the risk, effective regulatory clarity will strengthen and encourage banks to actively participate. Global trends Though the impact of emissions has likely started but may not be completely felt for many more years to come, the future climate policy is taking a definite and concrete shape. As the initial year of the first Kyoto commitment period (2008-2012) has commenced, it is expected that by 2012 the world carbon market will witness an exponential growth at $200 bn p.a. transferring half of that amount from the industrialized nations to the developing ones. As per the World Bank's State and Trends of Carbon Market 2008 report, Asia continues to dominate the market with about 87% of volumes transacted and 91% of values, led by China with CDM transactions at 73%, followed by India and Brazil (6%), Africa (5%), Eastern Europe and Central Asia (1%). Though India has 259 projects, the average annual income from registered projects through 2012 is expected to be only 15% as compared to China with 101 registered projects with annual income at 44%. China's success has resulted in CDM being nicknamed as `China Development Mechanism', the main reason (for China's success) being an opportunity it offers its buyers to diversify their portfolios. China with its large industrial base, economies of scale in origination and favorable investment climate is continuing to reap the benefits. The market power of China played a vital role in maintaining an informal pricing policy by raising the minimum price floor in the US$10.40-11.70 range, which was acceptable to private European buyers who continued to show strong demand. The scenario in India is different, in the sense, Indian projects generate small volumes of carbon credits, and since the market is driven mainly by SMEs, the same have to be procured from different projects, which is cumbersome. PSUs and private sector can club these small projects together and significantly improve the market growth, while in China, large quantity of credits can be traded from one single project.

27

Banks in other parts of the world are trying to reach areas that have failed to benefit much from carbon trading. Banco Sumitomo Mitsui Brasileiro in Brazil increased its portfolio of carbon credits last year by 1.5 million credits, generated from 15 small and medium-sized projects, including biomass power generation, small hydro projects and methane technology. The United Nations is trying to come up with measures to bring more banks into the market. Yvo de Boer, Executive Secretary of the UN Framework Convention on Climate Change, said the system could be adjusted to help governments issue `climate bonds', which would help a developing country government to set up a national emissions target. Also, Merrill Lynch Global Research has recently launched the MLCX Global CO2 Emissions Index based on guidelines governing the EU carbon market, while JP Morgan would acquire ClimateCare, a British company that builds clean-energy projects in the developing world. The future outlook for carbon markets is enticing. According to estimates, the Indian carbon market has the potential to supply 30-50% of the projected global market of 700 million CERs by 2012. Major projects sold so far include renewable energy (such as wind power, biomass cogeneration and hydropower), energy efficiency measures in sectors like cement, petrochemicals and power generation, and also reduction of industrial gases contributing to climatic changes. However, trading on the international platform requires clear-cut, well-laid and incentive-based policies in the areas of selection and criteria of projects, timing, sellerbuyer communication, eligibility of participants, etc.

28

Hitherto, the SMEs were availing the benefits of carbon market in India with very little or no participation from PSUs. As the exclusive rights to deal with carbon markets rests with policy makers and regulators, it is incumbent upon them to chalk out an effective strategy to expand their reach to PSUs and also encourage private participation. Also, lack of regulatory clarity is prohibiting many interested players from obtaining bids through public trading. A report prepared by Confederation of Indian Industry (CII) suggests creation of a carbon market fund for accelerating the capacity, development of carbon finance opportunities, growth and strengthening of carbon markets. The report also emphasizes the need for an organized carbon exchange with e-auctioning facility allowing only one side bidding, where intermediaries can buy CERs and at the opportune time sell in the international markets for higher prices. This will assure the project developers of getting reasonable rates with low procedural costs.

29

Last but not the least, Indian carbon market in relation to its potential is relatively small. To consolidate and tap the opportunities, creation of a carbon unit under government's control will help in preparation and monitoring of projects, financing, registration and accounting, collecting state duty for the registration and revenue from sale of carbon units. A robust structure with simplified procedures, creating awareness and providing updated information about related benefits to project owners, promoting local expertise on project development and encouraging international participation of buyers and investors, and providing tax incentives to banks for financing CDM projects will cost-effectively reduce GHG emissions, while contributing to the growth of their economies in a sustainable manner. That will further spawn new opportunities for banks.

30

CURRENT GLOBAL TRENDS

As per a World Bank's study report, the carbon credits traded globally in 2007 was slow, as against rapid growths recorded in the previous years. The findings suggest that the number of GHG reduction projects funded by industrialized nations and their private sector entities in developing countries has effectively stalled. The volume of carbon credits created by the CDM totaled 551 million tons worth of carbon in 2007, up slightly from 537 million tons in 2006, compared with 350 million tons in 2005, nearing 100 million tons in 2004 and 50 million tons in 2003. However, value-wise, the global carbon market grew to a whopping $64 bn in 2007. As per Point Carbon, a consulting firm estimates, the global market in carbon is expected to be worth 34 bn by the end of this decade. A glimpse of some selected countries' commitments (targets for emission reductions) under Kyoto Protocol for the period 2008-12 is provided in Table 1. The Annex 1 countries include: Germany, Australia, Austria, Belarus, Belgium, Bulgaria, Canada, European Community, Denmark, Spain, US, Estonia, Russia, Finland, France Greece, Hungary, Ireland, Iceland, Italy, Japan, Latvia, Lithuania, Luxemburg, Norway, New Zealand, Netherlands, Poland, Portugal, UK, Czech-Slovakia, Rumania, Sweden, Switzerland, Turkey and Ukraine. (Source: Brazilian Ministry of Foreign Relations). North America - US US, the world's biggest polluter, withdrew from the Kyoto Protocol Treaty in 2001 on the pretext that this treaty would cause adverse effects on US economy. However, US are well aware of the harmful effects of the carbon emissions leading to greenhouse effect and global warming. Therefore, US developed voluntary initiatives such as Voluntary Carbon Markets (VCMs) and Renewable Energy Credit (REC) systems which differ from CERs used for carbon trading under the CDM of the Kyoto Protocol. While CERs are compliance-based (GHG regulated), VCMs are those which are created by trading firms who take on voluntary commitments to reduce GHG emissions for a variety of reasons. Carbon credits developed in the US cannot be traded, sold, or purchased in the global markets operating under the Kyoto Protocol regulations.

31

Though there are no national programs in the US, there are several state or regional level programs for voluntary GHG reductions. For example, the US companies which develop renewable energy projects are able to set up and obtain RECs, which is the offset crediting mechanism in many states in the US. However, there are no national standards or certification process for RECs. However, CCX is North America's first voluntary carbon market based on cap-and-trade scheme, which is also prevalent in Canada and Mexico. It has a set of flexible rules that helps a wide variety of projects to participate. The targets were to be met through internal reduction efforts or purchasing credits from other firms or through emission reduction projects. There was a commitment to reduce the GHG emissions by 4% below 1998-2001 level by 2006. Canada The Alberta Carbon Market is a compliance-based market in Canada, where CCs are traded. CCX is implementing as a new auxiliary platform in Canada named as `Montreal Climate Exchange'. However, the framework CCX used to deliver offsets to this trading platform at Montreal Climate Exchange and it is similar to the requirements of project-based systems. Thus Alberta has just started (in late 2007) the first compliance-based market in North America. British Columbia State in Canada has made a proposal to cut annual greenhouse gas emissions 33% below the current levels by 2020 through a legislation which will make a suitable proposal. Europe Carbon trading is most developed in the European Union (EU) where the EU Emission Trading Scheme accounts for 80% of the global carbon trading market. UK The UK Emission Trading Scheme is a voluntary emissions program, formed to give the UK government and various UK companies the necessary familiarity in carbon trading. These UK companies join in exchange for a 90% discount on their climate change levy and such discount would not be allowed if a member company falls in commitment.
32

There were 38 participants in this scheme which lasted from 2002-2006 and the extent of emission releases avoided was of the order of 11.88 million tons. Future Forests is the largest and oldest retail offset provider in UK, which invests in GHG offset forestry projects in UK and abroad. Another UK firm viz. Climate Care focuses on energy-based projects with lofty expansion benefits in developing countries. Germany Germany is the leading country in protecting climate and has undertaken to cut emissions by 21% from 2008-2012 compared to 1990 GHG emissions level, under EU burden-sharing within the purview of Kyoto Protocol. Atmosfair is an offset contributor in Germany, loyal in providing high quality energy-based offsets placed in developing countries. Germany sensed climatic crisis a decade ago and offered several incentives for undertaking many renewable energy projects like solar and wind power. Russia Russia is the third largest GHG emitter in the world. Energy and transport related CO2 emissions constitute 84% of Russia's total GHG emissions. Russia has the principal emissions allowance surplus and is a key player in the areas of energy and climate policies. It has been taking adequate energy efficiency measures to participate in the Kyoto Protocol Flexible Mechanism. Switzerland MyClimate is an offset provider in Switzerland committed to provide sustainable development benefits to energy offsets in developing countries. Europe is the biggest buyer of carbon credits from the developing countries from Asia. Asian Countries Malaysia Carbon trading market in Malaysia is expected to be worth between RM 3.2 bn and RM 6.4 bn in the next five years, as more companies in this country are concerned about high GHG emission levels forcing them to participate in environmentally sustainable projects.
33

The palm oil plantation industry is expected to benefit from carbon trading, as it is an energy-intensive industry which can receive carbon credits from its operations. As per the research findings of the Malaysia Energy Centre, Malaysia has potentially 100 million tons of carbon credit, which is worth $60 bn globally and can go up to $1 tn in a decade. Indonesia Indonesia, which suffered through three decades of civil war and heavy human loss in 2004 tsunami, is expected to see $26 mn in carbon credits for protecting rainforest and environment. Its Ulu Mason project, backed by the Government of Aceh, Fauna and Flora International and Carbon Conservation for protecting 1.9 million acre of Ulu Mason forest is expected to reduce emissions from deforestation in developing countries.

China China is expected to be the largest seller of CERs in the world and Europe will be the largest buyer. Of late, the Chinese government has been making good efforts to save energy and reduce CO2 emission levels. By 2010, China proposes to achieve energy consumption reduction of 20% per unit of GDP. It had drawn energy saving plans for its new as well as old coal-based power plants. It has proposals to replace or modernize its outdated plants to reduce carbon emissions. However, different private business sectors also have their individual plans to reduce carbon emissions.
34

CARBON CREDIT AND INDIA

Among the developing countries, India was the foremost to offer a hedging tool for carbon credits earned through the CDM projects. The Indian government issued a notification on January 4, 2008 by bringing CERs under the realm of tradable commodities. But, the forward market is still in a nascent stage. However, a fresh beginning is being made by some companies to enter into forward contracts for carbon trading. India has recently begun to trade on its carbon credit trading exchanges viz. Multi Commodity Exchange of India Ltd. (MCX) and National Commodity and Derivatives Exchange of India Ltd. (NCDEX). MCX entered into an alliance with CCX in 2005 to introduce carbon credits in India. MCX, which is into futures trading, has become the first carbon commodity exchange in Asia. MCX is only for Indians and Indian companies. Those Indian companies which adhere to the UNFCCC norms and take up new technologies alone can sell carbon credits. In India, there are nearly 400 companies which adhere to UNFCCC norms and as a result can sell carbon credits to the European countries. The companies here are getting price signals for the carbon for the delivery in the next four to five years. But these companies are looking for best suited price. MCX trades in carbon credits emanating from CDM projects, mostly in key sectors of the Indian economy. These Indian companies are thinking that if the Europeans fail to meet their emission target levels by 2010, or 2012, the demand will go up significantly and they can get a better price. The CER futures for February 2009 on MCX platform is reportedly trading at Rs. 1,427 per contract. CERs or carbon credits are traded on the NCDEX also. However, till today, the companies which are into carbon trading are still unclear on the physical delivery mechanism which is creating confusion in the trading system. Within a few days of the trading on NCDEX, the trading volume had touched Rs.15-20 cr on a daily basis which was three to four times the expectation. But, global companies requiring offsetting their emissions by buying carbon credits from India are not able to participate in NCDEX trading. Thus the trading on NCDEX is only from price discovery point of view and not from the point of physical delivery of CERs.

35

However, MCX as well as NCDEX initiatives serve to address these inefficiencies in the carbon markets by providing the price discovery and hedging platforms to the buyers and the sellers of CERs. The Final Settlement Price will be relevant to certain deliverable CERs. The Indian companies have been hesitating to enter the forward markets in expectation of appreciation in prices of carbon credits. But of late, they have been availing the services of the reputed consultants in the field for following prudent strategies and a balanced portfolio of carbon credits.

India signed a Kyoto Protocol in 2002 regarding carbon emission but trading was commenced in 2007. There is huge scope for India in Carbon Credit Trading (CCT) as it is one of the leading generations of CER through CDM. CCT is the post Kyoto Protocol implementation phase. It brings a platform that provides transparency and vibrant situation in emission market. It helps the buyers and sellers of carbon credit to settle a fare deal in the commodities market.
36

India and China are likely to emerge as the biggest sellers and Europe is going to be the biggest buyer of carbon credits. The success of CER depends upon the fetching of economical prices for the implementers of CDM. Effective control of GHG particularly carbon is a function of transparent and effective pricing of CER received by CDM. In the present scenario, commodity exchanges appear to be a better mode by which greater extent of governance of transparency can be extended to carbon market. MCX is the national level online commodity exchange which provides the platform for trading carbon credit online. Carbon Credit Futures Contract (CCFC) is expected to cash in Indian firms by curbing energy usage through clean technologies. MCX is expected to have a level of around 130-150 million tons of carbon credit generation by the Indian companies. "Launching of carbon credit futures on the Indian trading platform would provide transparency to markets and help producers earn remunerative returns out of environmentally clean projects", said Joseph Massey, Deputy Managing Director of MCX. Trading in new generation commodities like carbon credits has placed MCX on the global map of innovative exchange for providing global products to the Indian industry. On January 21, 2008 MCX launched futures trading in carbon credits. It is the exchange where futures trading in carbon credits can be done, making it Asia's first ever commodity exchange, and among the select few in league with the CCX and the ECX. MCX has entered into a strategic alliance with CCX in September 2005 to initiate carbon trading in India. As per the licensing agreement with CCX, MCX can list its mini version of ECX Carbon Financial Instruments (CFI) and Chicago Climate Futures Exchange (CCFE), Sulphur Financial Instrument (SFI) on the MCX trading platform. The Indian market is a potential market for CCT and MCX is going to make this happen. Normally, the contract expires on a yearly basis in the month of December and people/traders which are involved in buying and selling can make settlements. These settlements may also happen prior to December. The total trading volume of carbon credits reached 9,600 tons (48 lots) on the first day of trading on MCX.
37

Recently, five contracts of carbon credits are working on MCX platform with expiry in December 2008, December 2009, December 2010, December 2011 and December 2012. India, China, other Asian and European countries are the potential market for carbon credits. India, the world's fourth-largest emitter of carbon dioxide, formed eight commissions to promote solar power, energy efficiency and water conservation as it seeks to mitigate damage from the changing climate. They are: National Solar Mission National Mission for Enhanced Energy Efficiency National Mission for Sustainable Habitat National Water Mission National Mission for Sustaining the Himalayan Ecosystem National Mission for a Green India National Mission for Sustainable Agriculture National Mission on Strategic Knowledge for Climate Change. Each of the eight panels has an institutional structure consisting of government departments, industry experts, academics and citizen representatives. Each so-called mission will devise a state-funded plan and have authority to carry it out. The missions include developing efficient building technologies and better managing waste, conserving water, and sustaining the environment of the Himalayas. India's commitment to ensure that its per-capita emissions of green-house gases do not exceed those of developed nations. But the new action plan makes no commitment to cutting overall emissions. Despite mounting international pressure, India has refused to make any specific commitments so far on reducing GHG emissions, pointing out that its percapita emissions are a fraction of those in rich nations.

38

CONCLUSION
The international carbon market is a key development in the global capital market and is the world's fastest growing market. Today, the importance of the innovative carbon credits as a part of the international emission trading norms, to reduce GHG emissions which pollute the air, cannot be overemphasized. The carbon credit trading has received a tremendous interest across the globe and is a great opportunity for the Indian and other global companies. However, a recent view of some experts is that the emissions cap will choke global growth. Rather a direct tax can reduce carbon emissions more effectively than the complex cap-and-trade system. In some of the Asian countries, CDM is actually contributing to sales of fake credits by developing new hydroelectric projects with little to no environmental benefit, worsening the climate crisis. Though the outlook for the landmark treaty, i.e. the Kyoto Protocol, is somewhat bleak today due to various flaws and frauds in carbon trading and its continuance beyond 2012 is being debated, still carbon trading continues to be a great opportunity for the developing as well as the developed countries of the world. India and China are likely to emerge as the biggest sellers and Europe is going to be the biggest buyer of carbon credits. Carbon credit market is a liquid market. Recently, Martin Stuchtey, partner with Mckinsey (Economic Times dated March 19, 2008) conducted a study in which it has been found that 60% of global executives regard climate change as being strategically important. It is surprisingly noted that one-third of the companies seldom considered climate change. But now climate change has become the corporate social responsibility and accordingly has a dimension of CER which leads to CCT. Martin also argued that there is a requirement of World Carbon Bank at the global level which makes business viable in the long-term giving prominence to low carbon economy. Indian companies are finding carbon credit market as an opportunity to become the leading protectionists of environment. They treat it as a win-win situation and it is hoped that in the coming year, companies will be able to confront bigger changes in CCT. .

39

BIBLIOGRAPHY
1. Jared Diamond (2005), Collapse: How Societies Choose to Fail or Succeed, Viking. 2. http://economictimes.indiatimes.com/articleshow/msid-1212812,curpg2.cms 3. http://sify.com/finance/fullstory.php?id=14155541 4. http://www.ebrd.com/country/sector/energyef/carbon/index.htm 5. http://www.cdmindia.nic.in/index_full.htm 6. http://www.ent.iastate.edu/Ipm/Icm/2004/1-26-2004/cc.html 7. http://www.emagazine.com/view/?106 8. http://www.ficci.com/news/viewnews1.asp?news_id=400 9. http://www.indiainfoline.com/sect/carb.pdf 10. http://www.norwayemb.org.in/ 11. http://www.norwayemb.org.in/development/ 12. http://www.sampsongroup.com/acrobat/carbon.pdf 13. http://www.science.org.au/nova/054/054key.htm 14.http://www.thehindubusinessline.com/2005/08/24/ stories/2005082402960100.htm 15. Times News Network, August 29, 2005. 16. World Bank Report (2006), State and Trends of the Carbon Market: 2006.

40