CARBON CREDIT & CARBON TRADING

CARBON CREDIT

Carbon credits and carbon markets are a component of national and international attempts to mitigate the growth in concentrations of greenhouse gases (GHGs). The mechanism was formalized in the Kyoto Protocol, an international agreement between more than 170 countries in 1997. One carbon credit is equal to one metric tonne of carbon dioxide, or in some markets, carbon dioxide equivalent gases(CH 4 , N 2 O, O 3 etc.) The plan works by capping the amount of total emissions that can be released by one company or business. United Nations Framework Convention on 5 Climate Change (UNFCC) is the central agency.

CARBON CREDIT
If there is a shortfall in the amount of gases that are used,

there is a monetary value assigned to this shortfall and it may be traded. These credits are often traded between businesses.
However, they also are bought and sold in international

markets at whatever the determined market value for them is. A carbon footprint has historically been defined as "the total set of greenhouse gas (GHG) emissions caused by an organization, event, product or person
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CARBON CREDIT
There are two types of market in carbon credit:
1. Compliance Market (Annexure I countries) 2. Voluntary Market (Non- Annexure countries)

CARBON TRADING
A carbon trading system allows the development of a

market through which carbon dioxide or carbon equivalents can be traded between participants, whether countries or companies. Each carbon credit is equal to 100 metric tons of carbon dioxide, which can be traded or exchanged in market.
There are two kinds of carbon trading Emission trading

and trading in Project-based Credits. The two categories are put together as Hybrid trading System

TYPES OF CARBON TRADING

1. EMISSION TRADING: A company can reduce its emission by half the cost of allowance bought from other company On the other hand, a company with higher expenditure for reduction of its emissions buys the required allowance from other company to save its emission cost 2. PROJECT-BASED TRADING: Government & World Bank subsidized credit for projectbased trading to the companies calculating how much carbon dioxide equivalent they save/reduces Project-based Credit trading includes baseline-and-credit trading and offset trading
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TYPES OF CARBON TRADING

3. HYBRID TRADING SYSTEM:
In Hybrid trading system, both emission trading and

offset trading are used and try to make allowance exchangeable for project-based credits.
Hybrid trading system is enormously complex as it is not

only difficult to try to create credible credit and make them equivalent to allowance

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POSITION OF INDIA
India is one of the exempted from KYOTO protocol as

they are stated as developing countries, but overseas companies can buy carbon credits from these countries.
The Multi Commodity Exchange of India Ltd entered into

an alliance with the Chicago Climate Exchange in 2005 to introduce carbon credit trading in India India is considered as the largest beneficiary, claiming about 31 % of the total world carbon trade through CDM

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THANK YOU

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