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Kyoto Protocol

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Published in: Chemistry
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Mechanism of Kyoto Protocol and Carbon Markets.

Mukul D / Delhi

1 year of teaching experience

Qualification: Bachelor's of Engineering

Teaches: All Subjects, Geography, Mathematics, Science, Algebra, Bio Technology, Chemistry, Physics, BITSAT, IIT JEE Advanced, IIT JEE Mains

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  1. 4-4 NSIT MECHANISM OF KYOTO PROTOCOL Kyoto Protocol fib Submitted To:- Dr. Hema Khanna Submitted By:- Mukul Dhingra 813/BT/12
  2. ACKNOWLEDGEMENTS I would like to express profound gratitude to my guide Dr. Hema Khanna, for her invaluable support, supervision and useful suggestions throughout the project "MECHANISM OF KYOTO PROTOCOL". 1 am extremely grateful to her for taking keen interest in the project and providing support as and when needed. I am grateful for the cooperation and constant encouragement from my honourable Head of Department, Prof. A.K. Dubey. I am thankful and indebted to all those who helped me directly or indirectly in completion of this project. MUKUL DHINGRA SEVENTH SEMESTER B.E. BIOTECHNOLOGY NETAJI SUBHAS INSTITUTE OF TECHNOLOGY
  3. CONTENTS Title Chapter 1 : Introduction Chapter 2: Review of literature Chapter 3: Research Methodology 3.1- Objectives 3.2- Scope of the study 3.3- Limitations of the study Chapter 4: KYOTO PROTOCOL 4.1 -MECHANISMS OF PROTOCOL (A) JOINT IMPLEMENTATION (B) CLEAN DEVELOPMENT MECHANISM (C) INTERNATIONAL EMISSIONS TRADING Chapter 5: UNCANNY CARBON MARKETS 5.1- GENERAL METHODOLOGY 5.2- BUYERS Chapter 6: Summary, Conclusion and Suggestions Bibliography Annexure
  4. CHAPTER 1 INTRODUCTION The greenhouse gas market has developed significantly over the past several years. From a theoretical construct proposed by politicians and academics during the early to mid-1990s, to an important part of the Kyoto Protocol in 1997 to what is today a vibrant and active market that has seen in excess of 250 million tons of C02 equivalents (tC02eq) transacted Trade in carbon credits has the potential to make forestry more profitable and sustain the environment at the same time. It has therefore attracted considerable attention of the likely buyers of credits, producers (i.e. forest growers), and others. However, it is difficult to stay fully informed about carbon credits because of the complexity and the pace of developments on the subject. This report looks at the current situation on carbon credit markets and trade. The Kyoto Protocol is an international agreement linked to the United Nations Framework Convention on Climate Change, which commits its Parties by setting internationally binding emission reduction targets. Recognizing that developed countries are principally responsible for the current high levels of GHG emissions in the atmosphere as a result of more than 150 years of industrial activity, the Protocol places a heavier burden on developed nations under the principle of "common but differentiated responsibilities. " The Kyoto Protocol was adopted in Kyoto, Japan, on 11 December 1997 and entered into force on 16 February 2005. The detailed rules for the implementation of the Protocol were adopted at COP 7 in Marrakesh, Morocco, in 2001, and are referred to as the "Marrakesh Accords. " Its first commitment period started in 2008 and ended in 2012. The Kyoto Protocol applies to industrialized nations only. Developing countries, including India and China, were not required to commit to reductions because their per-capita greenhouse gas emissions are much lower than those of developed nations. This decision also took into account the fact that the poorer economies of the developing countries would be unable to absorb the costs of switching from a fossil fuel based system to cleaner fuels. The plan is that poorer countries will be brought more actively into future climate change agreements as cleaner technologies develop and become less expensive. Under the Kyoto Protocol, industrialized nations agreed to cut their greenhouse gas emissions to a certain percentage below 1990 levels. The year 1990 was chosen as a baseline because that was the year when the UN first launched negotiations on climate change. These total cuts in emissions would have to be accomplished by the target period of 2008-2012. Eighty-four countries, including the United States, the European Union, Japan, Russia, and Canada, signed the Protocol. These signatures indicate a desire to participate in the program and work towards the agreed reductions. The European Union agreed to cut its emissions by 8% below 1990 levels, Japan by 7%, the United States by 7%, and Canada by 6%. Russia agreed to stay at 1990 levels, which still represents a significant reduction. The targets differentiate because some countries will find it easier to make cuts than others. None of these targets are meaningful until a country ratifies the Kyoto Protocol and agrees to put the appropriate measures in place to achieve the reductions. In order for the Kyoto Protocol itself to come into effect, 55 countries, together producing at least 55% of the world's 1990 carbon dioxide emissions, must ratify the Protocol. This is known as the 55/55 target. The Kyoto
  5. Protocol suffered a major setback in March, 2001, when the United States, which produces 36.1% of the carbon dioxide emissions of the Protocol's Annex I countries, decided not to ratify the Protocol. This meant that in order for the Protocol to come into effect, it became absolutely crucial for countries such as Russia, which produces 17.4% of emissions, to ratify in order for the 55% target to be achieved. Eligibility requirements of the Protocol To participate in the mechanisms, Annex I Parties must meet, among others, the following eligibility requirements: • They must have ratified the Kyoto Protocol. They must have calculated their assigned amount in terms of tonnes of C02- equivalent emissions. They must have in place a national system for estimating emissions and removals of greenhouse gases within their territory. They must have in place a national registry to record and track the creation and movement of ERUs, CERs, AAUs and RMUs and must annually report such information to the secretariat. They must annually report information on emissions and removals to the secretariat. The Kyoto mechanisms: Stimulate sustainable development through technology transfer and investment Help countries with Kyoto commitments to meet their targets by reducing emissions or removing carbon from the atmosphere in other countries in a cost-effective way Encourage the private sector and developing countries to contribute to emission reduction efforts Kyoto Protocol • Status of Annex I Parties Ratification Not Ratified Ratified EU 29.8% (24.2% ror the original member countries. including U.K.. France, nited States Germany, and Italy; 5.6% ror the 10 new 36.1% member countries) Australia 2.1% Japan 8.5% / Russia 17.4% Currently 61.6% // 55% line required for taking effect Romania, Norway, Switzerland, etc. 2.4% New Zealand 0.2%
  6. CHAPTER 2 REVIEW OF LITERATURE: Rio de Janeiro (1992):- The UN Conference on the Environment and Development results in the Framework Convention on Climate Change ("FCCC" or "UNFCCC") among other agreements. Berlin (1995):- Parties to the UNFCCC met in the 1st Conference of Parties (COP) to the UNFCCC to outline specific targets on emissions. Kyoto, Japan (December, 1997):- The parties conclude the Kyoto Protocol, in which they agree to the broad outlines of emissions targets. US President Bill Clinton (1997):- To help countries meet targets, Kyoto also offered a range of market mechanisms that could help rich countries offset emissions by investing in low carbon projects in poorer parts of the world. It was hailed as an "environmentally strong and economically sound" and "It reflects a commitment from our generation to act in the interests of future generations". (2001):- Sixteen National Science Academies stated that ratification of the Protocol represented a "small but essential first step towards stabilising atmospheric concentrations of greenhouse gases. (2002):- Washington's lawmakers disagreed, the Senate voting 95-0 against the treaty, and Clinton's successor George W Bush withdrew US support, labelling it "fatally flawed". Russia and Canada ratify the Kyoto Protocol to the UNFCCC bringing the treaty into effect on 16 February 2005. (2005):- The National Science Academies of the G8 Nations and Brazil, China and India made a statement where they "urged" all nations to "take prompt action to reduce the causes of climate change, adapt to its impacts and ensure that the issue is included in all relevant national and international strategies." They stated that these actions should be taken in line with UNFCCC principles. (16th February 2005):- Some 8 years after the world's nations came together in Kyoto in Japan in 1997 to discuss Global Warming, the Kyoto Protocol finally came into force. The very phrase 'Kyoto Protocol' has become synonymous with the idea of saving the planet from global meltdown, and yet in truth quite what we should be expecting to happen next remains something of a mystery. Hartwell Paper, London School of Economics, May (2010):- The paper was written by 14 academics from various disciplines in the sciences and humanities, and also some policies
  7. thinkers, and they argued that after the failure of the 2009 Copenhagen Climate Summit, the Kyoto Protocol crashed and they claimed that it "has failed to produce any discernable real world reductions in emissions of greenhouse gases in fifteen years. " They argued that this failure opened an opportunity to set climate policy free from Kyoto and the paper advocates a controversial and piecemeal approach to decarbonisation of the global economy. The Hartwell paper proposes that "the organising principle of our effort should be the raising up of human dignity via three overarching objectives: ensuring energy access for all; ensuring that we develop in a manner that does not undermine the essential functioning of the Earth system; ensuring that our societies are adequately equipped to withstand the risks and dangers that come from all the vagaries of climate, whatever their cause may be. (2011):- Canada became the first signatory to announce its withdrawal from the Kyoto Protocol. (31 December 2012):- The first commitment period under the Protocol expired. Doha, Qatar (8 December 2012):- The "Doha Amendment to the Kyoto Protocol" was adopted. The amendment included, new commitments for Annex I Parties to the Kyoto Protocol who agreed to take on commitments in a second commitment period from 1 January 2013 to 31 December 2020. A revised list of greenhouse gases (GHG) to be reported on by Parties in the second commitment period. Amendments to several articles of the Kyoto Protocol which specifically referenced issues pertaining to the first commitment period and which needed to be updated for the second commitment period. UNFCCC (@UNFCCC) February 16, 2015:- Industrialised Kyoto Protocol Countries reduced Emissions Upto 22.6%
  8. CHAPTER 3 RESEARCH METHODOLOGY: 3.1-OBJECTIVES: The objectives of the present study are , To study the MECHANISMS OF KYOTO PROTOCOL , UNCANNY CARBON MARKETS and its PERSPECTIVES 3.2-SCOPE OF THE STUDY: On a technical level Kyoto has seen dramatic developments it can account for. It introduced the idea of a multinational carbon market — the Clean Development Mechanism (CDM) — and delivered new rules for reporting, accounting and verifying emissions. It offered means of support to poorer countries — through the establishment of the Adaptation Fund and through mechanisms designed to incentivise green investments in the developing world. And its rules- based architecture influenced the creation of low carbon legislation across the world notably the UK's 2008 Climate Change Act. Using the Kyoto Protocol, we can reach a state where we can certainly lower the emission levels. 3.3-LIMITATIONS OF THE STUDY: Some of the main criticisms were against categorizing different countries into annexes, with each annex having its own responsibility for emission reductions based on historic GHG emissions and, therefore, historic contribution to global climate change. The criticism of the Protocol has been based on the idea of climate justice. This has particularly centred on the balance between the low emissions and high vulnerability of the developing world to climate change, compared to high emissions in the developed world.' The use of carbon off-sets as a method for a country to reduce its carbon emissions. Although it can be beneficial to balance out one GHG emission by implementing an equal carbon offset, it still doesn't completely eliminate the original carbon emission and therefore ultimately reduce the amount of GHG's in the atmosphere. The overall umbrella and processes of the UNFCCC and the Kyoto Protocol have been criticized for not having achieved the stated goals of reducing the emission of carbon dioxide (the primary culprit blamed for rising global temperatures of the 21st century). Most important criticism of the Kyoto Protocol is that it simply represents too little, too late. When it initially presented its findings to the United Nations in 1990, the IPCC charged that a drastic reduction of greenhouse gas emissions in the range of 60 to 80 percent was necessary just to slow the process of climate change to an acceptable rate that would allow ecosystems to adapt. Even if it were implemented at 100% effectiveness, the Kyoto Protocol barely represents any progress at all, both because its reduction targets are low and emissions in developing countries will continue to grow unchecked.
  9. CHAPTER 4 THE KYOTO PROTOCOL The Kyoto Protocol aims to tackle global warming by setting target levels for nations to reduce greenhouse gas emissions worldwide. These targets vary between countries and regions, but globally the initial target is to reduce greenhouse gas emissions to 5.2 percent below 1990 levels (base levels) during the 'commitment period', i.e. "08-12" The convention covers all greenhouse gases not covered by the "87 Montreal Protocol to the United Nations Convention on protection of the ozone layer. The focus of the Kyoto Protocol, however, is on the reduction in the levels of the following six gases: Carbon Dioxide (C02), Methane (CH4), Nitrous Oxide (N20), Hydroflurocarbons (HFCs), Perflurocarbons (PFCs) and Sulphur Hexafluoride (SF6). The Kyoto Protocol got its legal sanctions with ratifications by Russia and Canada. However, the US and Australia have declined to ratify it, which reflects sadly on these two developed countries. But the Protocol will not apply to the developing but signatory countries such as India, China and Brazil. They, however, are free to sell "carbon credits" to other countries. THE KYOTO MECHANISM The protocol broke new grounds with three innovative mechanisms namely, the Joint Implementation (JI), the Clean Development Mechanism (CDM) and International Emission Trading/Carbon Trading, which have been designed to boost the cost effectiveness of climate change mitigation by opening ways for parties to cut emission or enhance "sinks", more cheaply abroad than at home. ,Joint Implementation (JI) Joint Implementation (JI) is a project-based mechanism developed under the Kyoto Protocol (KP), designed to assist Annex 1 countries in meeting their emission reduction targets through joint projects with other Annex 1 countries, meaning that JI projects can only be implemented between capped industrialized countries. One or more investors (Governments, companies, funds etc.) will agree with partners in a host country to participate in project activities which generate Emission Reduction Units (ERUs), in order to use them for compliance with targets under the Kyoto Protocol. Emissions from the host country are limited under the KP; JI projects reduce emissions in the host country and free up part of their total amount (Assigned Amount) which can then be transferred to the investor country in the form of ERUs, which are subtracted from the host country's allowed emissions and are added to the total allowable emissions of the investor country. Projects may start in 2000; however ERUs can only be used for compliance from 2008, even in the EU ETS. The Two Procedures to implement JI projects: Track 1 When an Annex 1 country meets all the eligibility and reporting requirements under the KP, it can issue ERUs to a project, which can then transfer them to the investing entity. Track 2
  10. When an Annex 1 country is not in compliance with all the requirements, ERUs generated by a project must be verified by an external body under a procedure similar to that of the CDM. The host party must meet several requirements relating to the establishment of its Assigned Amount and national registry before it can issue and transfer ERUs. The Clean Development Mechanism The CDM is a mechanism established by Article 12 of the Kyoto Protocol for project-based emission reduction activities in developing countries. The CDM is designed to meet two main objectives: to address the sustainable development needs of the host country, and to increase the opportunities available to Parties to meet their reduction commitments. CDM Project Cycle: Participants must prepare a „Project Design Document" including a description of the baseline, i.e. the technology to be used, and the monitoring methodology to be used, an analysis of the environmental benefits that the project is intended to generate. The „Project Design Document" is first submitted to the National CDM Authority for validation, after receiving which the same is registered in the ,Host Countryee. Then the Project Design Document" is submitted to UNFCCC, an international operational entity for review and validation. It does so after providing an opportunity for public comments and taking the same into account. After a project is duly validated, the operational entity forwards it to the executive board for registration. The project is then ready to be operationalized. Once the project is running, it will be monitored by the "Host Countryee throughout the project cycle. The CDM Project Cycle comprises seven steps, a. Submission of the project design document to the National CDM Authority; b. Project registration in the host country; c. Project validation and registration by the Executive Board of the UNFCCC; d. Project monitoring by the host country; e. Verification and certification; f. Issuance of Certified Emission Reductions (CERs) CER: A CER unit is equivalent to one ton of C02. The CER can be allotted in two different ways. One is a fixed crediting period of 10 years or first crediting period of 7 years which can be extended twice for a period of further seven years. Consultants for validation of CDM projects are: Pricewaterhouse Coopers, DNV, Ernst & Young, TERI and WINROCK. International Emissions Trading IET is a flexibility mechanism of the Kyoto Protocol which allows the trade of Assigned Amount Units (AAUs) among Annex B countries. It is expected that this activity will be delegated by national governments to entities within their jurisdictions so that international trading between entities will occur. This will adjust each nations 'pool' of AAUs. Emission Trading/Carbon Trading What does this all have to do with carbon emissions trading? Under the UNFCCC, countries are permitted to use a trading system to help meet their emissions targets, although the details are yet to be agreed upon. In principle, a country may allocate permits to individual companies for the emission of a certain quantity of greenhouse gases. If permits are only issued to a level equal to or below the assigned amount, then a country should meet its Kyoto commitment (assuming that the measures of its emissions are accurate). If a country is incapable of meeting its target, it could conceivably buy permits from countries that are under
  11. their targets. Similarly, companies within a country that prove more able to reduce their emissions would be allowed to ' 'tradeee excess permits to other, more polluting, enterprises. Emissions' trading is a general term used for the three Kyoto Protocol flexibility mechanisms. It is a market-based system that allows firms the flexibility to select cost- effective solutions to achieve established environmental goals. These flexibility mechanisms include the use of carbon sinks (pools that take up released carbon from another part of the carbon cycle) and emissions trading. Under Article 3.3 to the Protocol a planted forest which is established after 1 January 1990 on previously cleared land will count as a CARBON SINK. The carbon dioxide sequestered in such a forest can be used to create carbon credits. Emissions trading will allow countries and individual companies to buy and sell carbon credits created by activities that reduce the level of GHG emissions. The creation of carbon credits using sinks will only ever form a small proportion of the activities that will need to be implemented to achieve emission reduction targets. This is because the total area that can be planted as carbon sinks is limited and the cost in establishing such forests is significant. It should also be noted that under the Kyoto Protocol, the only carbon credits that can be traded to meet emission reduction requirements are those credits arising from carbon sequestration between 2008 and 2012 (the first commitment period under the Kyoto Protocol), plus any subsequent agreed commitment periods. With emissions trading, firms can meet established emission goals by: (a) Reducing emissions from a discrete emissions unit; (b) Reducing emissions from another place within the facility; (c) Securing emission reductions from another facility, or (d) Securing emission reductions from the marketplace. Emissions' trading encourages compliance and financial managers to pursue cost-effective emission reduction strategies and provides incentives to emitters to develop the means by which emissions can inexpensively be reduced. Carbon credits as defined by Kyoto Protocol are one metric ton of carbon emitted by the burning of fossil fuels. Selling and Buying Project-Based Emission Reductions The international pre-compliance market, with some 250 million tC02eq transacted to date, is the largest and most significant market for project-based emission reductions. This section sets out the considerations and parameters for this market. Transactions are influenced by developments of the rules being negotiated under the Kyoto Protocol process. Value can be generated from a reduction in actual emission, avoidance of potential emission (both emission reductions) or the creation of emission offsets (through carbon sequestration). Baselines and Measurement The volume of emission reductions or offsets created by a project can be calculated in various ways and depends on the type of project, location of the project and the purpose of the transaction. The general approach is to consider calculate the difference between the volumes of greenhouse gas emissions with and without the project. For ease of measurement, each of the six greenhouse gases, regulated in the Kyoto Protocol, has an internationally agreed 'Global Warming Potential' (GWP) assigned to it. These GWP factors are used to convert each of the five gases that are not C02 into tons of C02 equivalent (C02eq), which is the standard unit for trading.
  12. CHAPTER 5 UNCANNY CARBON MARKETS Carbon Credits are traded at C02E Exchange in UK, CDM Exchange in Europe and the Chicago Climate Exchange (CCX) which has announced a license agreement with Multi Commodity Exchange of India to trade in pollution as commodity. However, as for most of the traders there is no standard contract for purchasing carbon, it is not easy to find out prices. Transaction types Emission reduction transactions range from simple spot purchases and sales to structured options and direct investment. Spot transaction Delivery and payment occur during a standard timeframe shortly after the agreement has been executed. Forward settlement Delivery of reductions and payment are deferred to a future date (or dates) also specified at the time of the trade. Options Contracts that give the option buyer or seller the right, but not the obligation, to enter into a specific transaction on or before a certain date. The price of the emissions reductions is locked in up-front along with the optionees exercise date and the purchaser pays a premium for this flexibility. Project investment Buyers may also choose to invest directly in projects that will produce an acceptable rate of return along with emission reductions. General Methodology for Evaluation of Carbon Sequestration Technologies Estimation of Carbon Credits in Carbon Dioxide Sequestration Activities The performance objective for a sequestration technology is not necessarily zero emission of C02 but rather a reduction compared with the baseline of current practice. To make sure that all carbon aspects are considered, care must be taken to ensure that there are no hidden emissions when making an alteration from the baseline. Approach • All resources used in a sequestration activity should be reviewed by estimating the amount of greenhouse gas emissions for which they historically are responsible. It is done by introducing a quantifier we term Full-Cycle Carbon Emissions (FCCE), which is tied to the resource. • The future fate of sequestered carbon should be included in technology evaluations. It is addressed by introducing a variable called Time-Adjusted Value of Carbon Sequestration (TVCS) to weigh potential future releases of carbon, escaping the sequestered form. • The Figure of Merit of a sequestration technology should address the entire life cycle of an activity. The figures of merit developed, relate the investment made (carbon release during the construction phase) to the lifetime sequestration capacity of the activity. To account for carbon flows that occur during different times of an activity, the Time Value of Carbon Flows is incorporated. Forest Sequestration
  13. Trade in carbon credits has the potential to make forestry more profitable, and enhance the environment at the same time. It has therefore attracted considerable attention of the likely buyers of credits, producers (i.e. forest growers), and others. However, it is difficult to stay fully informed about carbon credits because of the complexity and the pace of developments on the subject. The Costs A first step in selling the sequestered carbon is to measure its quantity in trees. A range of simple to complex techniques is available for the purpose. In general, the techniques are more reliable for plantations of species such as radiata pine and certain eucalypts, but less so for plantations of other species or of mixed ages and mixed species. Other things remaining the same, measurements of carbon with a higher statistical accuracy will result in a higher cost for the grower. The next series of steps in selling the carbon involve: aggregation of individual growers" carbon in to a sizeable pool; verification of the pool; issuance of carbon credit certificates by an independent agent; registration of the certificates and their lodgment with an authorized market clearing house (e.g. the Sydney Futures Exchange) for sale; and exchange of the certificates and the monies. Besides the costs of the afore-mentioned steps, growers may also incur some other costs. An example is the cost of extra insurance against the loss of trees through fire, windstorm, and the like. The costs of services and transactions associated with selling carbon are subject to economies of scale. Hence, small scale growers will pay a higher cost per unit of carbon. People designing the trading mechanism are very conscious of the problem, and are trying hard to find ways and means to keep the costs low for growers. However, growers themselves could also take steps to reduce their costs by joining or forming growers" cooperatives or groups that offer economies of scale. Growers need to be aware of one more major „costee If a grower, who has sold carbon credits from his/her forest, but then goes on to harvest the forest, he/she will incur carbon debits. The quantity of debits will be at least equal to the quantity of carbon credits sold. In this situation the grower will be required to fully offset the debits by buying carbon credits in the market place; or having additional Kyoto forests; or using a mix of both. What is the total of all the costs a grower is likely to pay for producing certified carbon credits suitable for trade? It is a very important question. So, it is especially disappointing to say that reliable information on the costs is unavailable, and therefore the question is unanswerable. It would be most helpful to growers if reliable information on the costs were readily available to them. Carbon Credit Prices The current prices of credit ranges from Euro 6 to Euro 12 per ton of C02. In 2004, 107 million ton of C02 were exchanged through green projects, a 38% rise from 2003. And considering the steep penalty for default at Euro 40 per ton, the volumes can only raise so, is it worthwhile for small scale growers to undertake production of carbon credits for trading? A general thrust of studies conducted is that, under the current rules, many small scale growers may not find carbon credit trade sufficiently rewarding. This is because of the relatively high total cost per unit of carbon credit, and the enormous technical, financial and institutional risks and uncertainties. To capture the potential benefits of carbon credit trade, growers should monitor the forward trade prices of carbon credits; seek more information; stay informed on the changes in the Kyoto rules and the government policy; keep records of their own forestry operations; and take other actions to reduce the costs, risks and uncertainties.
  14. Stumpage Prices ANU Forestry has collected information on actual stumpage recently received by small scale growers. As the collected information was insufficient for deriving averages and trends, it is presented in case study format in the following table. Stumpage State/ Region NSW, Tumut reg.ou Western Australia, s-w Western Australia, T asmatua case studies Period 1999 August to October October to Dcccmbcr November to December November to December December 2000 Febroaty January Log type Pine sawlogs Pine • Sawlogs Preservauon logs Pulplogs Other 50fnvood: Pine sawlogs Other softwood: Sawlogs Pine Sawlogs Pulplogs Case logs Pine • Sawlogs Pulplogs Case logs Pine: Sawlogs Pulploss Case logs Pine Sawlogs Pulplogs Other softwood. Case loots Stumpage 526 19/t S37.:t sco,f Still Sift S2ft Snit S22 S5!t S43tcu. tu S3S/t SC .95 $35/t S70;cu. SIO;t S16.ct Comments km to null or to exporter 150 cu. m 213 cu. m 344 t 21 t 506 t 1,726 cu. an, mostly 4.S m: 60 km to 65 cu. 300 km to mill (trial litto Sydney) Extraction cost $16 50/cu m or t: 129 cu. m, uausport cost S4.33!cu. 39 t, transport cost $4.03 't 17 t. transport cost 3Yt 623 cu. m. 94 km to mill. extraction cost $15.50/cu. m 107 t, 94 km to mill. exuaction cost S16/t 74 t, 10 km to null, cxtrnchon cost SIS 'Olt—SlS SO/t Extraction cost: S15.50fcu. m and $15.50.'t—S16't: 1.078 cu. an, 94.5 to null 304 t, 94 km to mill 165 t. 10 km to mill Age 20, 3rd thinnzng 117 t. cleanvood. SED 20 cm. 12 km to mill S59fcu. m 30 t. 270 km to mill Age 20, 3rd thmmng. 30 t. clearwood. SED 15 ctw 36 km to mill. S40/t Mill door prrcc. SED. Small end diamctcr of logs. The Buyers In line with the trend last year, data confirms the emergence of Japanese entities, mostly Japanese private firms, as the largest buyers of CERs. Japanese entities accounted for 41 % of the "Carbon Creditsee purchased in "03-04, against 21% in e c02-03. The second and the third largest buyers are still the government of the Netherlands, through various agencies and intermediaries (Centre and programs established within Rabobank, the International Finance Corporation, the International Bank for Reconstruction and Development, and the Coporacion Andina de Fomento), and the Carbon Finance Business (CFB), through the Prototype Carbon Fund and the Community Development Carbon Fund, each with nearly a quarter of purchases in "03-04.
  15. Asia is the largest supplier of Carbon Credits, followed by Latin America, developed economies, and Eastern Europe. Five countries (India, Brazil, Chile, Indonesia and Romania) represent two-thirds of the supply in terms of volume of Carbon Credits. Share of Market Buyers (in terms of volume of emission reductions purchased in "04) B uyers Japan The Netherlands Carbon Finance Busmess USA Canada Australia& New Zealand Other ECT 0/0 Volume 41 23 24 3 3 3 3 WORLD SHARE OF MARKET BUYERS o Japan The Netherlands o Carbon Finance Business USA • Canada o Australia& New What Is In Store For India? INDIA, being a developing country, is exempted from the requirement of adherence to the Protocol. However, it can sell the Carbon Credits to the developed countries. Companies investing in windmills, Bio-Diesel, Co-Generation, and Bio-Gas are the ones that will generate Carbon Credits for selling to the developed nations. The accompanying table gives the names of some of the companies that stand to benefit from the Carbon Credit trading and the new regime. The Protocol is designed to not only undo the climatic ill-effects of the industrialization but also to identify the economic beneficiaries of the same and make them more accountable in damage control, deserves high applause; all the more so, for its flexible approach and concern in letting the business and economies continue while doing the damage control.
  16. Companies Torrent Power AEC Gujarat Fluro Chemicals Indian Alummmm Lanco Group Jaypee Associates Chennai Petroleum Refineries Balram ur Chini Jindal Vijaynagar Steels Orissa S onoe fron Kalpatal-u Power Transmission Indo-GulfC oration Graslül Industries Project Energy Efficiency Gas Capture Gas Ca ture Fuel Switching Energy Efficiency Energy Efficiency Renewables Energy Efficiency Ener Efficien Renewables Ener Efficien Energy Efficiency CERs (units) 11900752 3380076 2553344 2289478 1084469 1010000 93629 575967 424549 313743 245256 242270 Estimated Amount Receivable 199.9 56.8 42.9 38.5 18.2 17.0 15.7 9.7 7.1 5.3 (Rs Crore) INDIAN CARBON TRADERS : PART 1 o Torrent Power AEC Gujarat Fluro Chemicals Indian Aluminium c] Lanco Group • Jaypee Associates INDIAN CARBON TRADERS PART 11 o Chennai Petroleum Refineries Balrampur Chini o Jindal Vijaynagar Steels o Orissa Sponge Iron
  17. CHAPTER 6 SUMMARY, CONCLUSION AND SUGGESTIONS Summary: The greenhouse gas market has developed significantly over the past several years. From a theoretical construct proposed by politicians and academics during the early to mid-1990s, to an important part of the Kyoto Protocol in 1997 to what is today a vibrant and active market that has seen in excess of 250 million tons of C02 equivalents (tC02eq) transacted. Analysts have forecasted the size of the future global greenhouse gas market to range from US$IO billion to US$I trillion by 2010. Kyoto Protocol is certainly a step in the right direction in that it raised awareness about the severity of global climate change, it is not a complete solution and will not solve the problem alone. Real results and improvements will be seen when fundamental reductions in energy consumption and changes in lifestyle are achieved on an individual level across the globe. In order for prospective participants to successfully enter these new markets they need to thoroughly understand their global nature and increasing complexity. This new market offers effective risk management for companies with emission constraints and substantial opportunities to companies and sponsors with emission reduction projects Conclusion: New greenhouse gas markets are emerging in countries, regions and corporate alliances around the world. Kyoto Protocol and emerging greenhouse gas market and describes how companies/countries can manage their energy resources and/or maximize their opportunity. Under Kyoto, industrialised nations pledged to cut their yearly emissions of carbon, as measured in six greenhouse gases, by varying amounts, averaging 5.2%, by 2012 as compared to 1990. That equates to a 29% cut in the values that would have otherwise occurred. However, the protocol didn't become international law until more than halfway through the 1990—2012 period. By that point, global emissions had risen substantially. Some countries and regions, including the European Union, were on track by 2011 to meet or exceed their Kyoto goals, but other large nations were falling woefully short. And the two biggest emitters of all — the United States and China churned out more than enough extra greenhouse gas to erase all the reductions made by other countries during the Kyoto period. Worldwide, emissions soared by nearly 40% from 1990 to 2009. The Protocol commits Annex I countries (developed countries and countries in economic transition, which have accepted the emission-reduction goals for the period between 2008 and 2012) to individual, legally-binding commitments on the reduction of their greenhouse gas- emissions. The general target that the developed countries have to meet is to reduce their greenhouse-gas emissions by about 5% below their 1990 levels in the timeframe addressed by the Kyoto Protocol, namely 2008-2012. The individual targets the Protocol assigns for the countries vary from 7% for the United States (although it has since withdrawn its support for the Protocol), to 8% for the European Union which, however, it can distribute among its member states. Some countries, on the other hand are allowed to increase their greenhouse gas emission — such as Iceland (may have a 10% increase of emissions) or Portugal (27% increase allowed).
  18. Suggestions: The Kyoto Protocol is significant because, unlike previous negotiations on climate change, which had only suggested that governments voluntarily reduce their emission of greenhouse gases, it contains concrete mandatory aims for the countries which have signed it. It will be possible to reduce emissions most easily in developing nations, since the adoption of relatively simple energy efficiency measures can have a huge impact. More advanced alternatives like solar and other clean technologies may actually be more competitive in developing than in the industrialized nations, since many developing countries do not already have a fully established electric power grid. The sooner that developing nations are brought under the agreement, the easier it will be for them to pursue a long-run clean development path. This system would only bolster the fight against global warming, since emissions have the same impact regardless of their source. Signing on to emissions caps under these conditions should be extremely attractive for Mexico and other developing countries. By agreeing to caps, these nations will have the opportunity to pursue an alternative path to development. Workers in the United States would also gain in this scenario. The developing nations would have billions of dollars with which to purchase U.S. exports of capital goods and clean technology products. The Kyoto Protocol allows for flexibility in terms of the methods countries could use to meet their gas reduction commitments. Such methods include: Compensating for emissions by increasing the number of a country's carbon sinks. Carbon sinks are forests, which take up carbon dioxide from the atmosphere. Countries are allowed to create carbon sinks on suitable sites outside of their own territory. Emissions trading — trading of emission allowances between countries. The emissions trading method gives countries the opportunity to reduce emissions where it is most economically efficient to do so. Clean Development Mechanism — promotes environmentally-friendly foreign investments from industrialized countries into developing countries. The developing countries are thus aided at achieving sustainable development. Joint Implementation allows developed countries to sponsor foreign research to decrease emission levels in countries of economic transition. In exchange for the developed country's investment, the host country provides the investor with emission reduction units, also known as carbon credits. The developed economies can afterwards use their carbon credits towards meeting their emission-reduction requirements under the Kyoto Protocol.
  19. BIBLIOGRAPHY Journals: Saji Baby," Production of Green House gases", Nature Environment and Pollution Technology, 2005, Pg. 171-178 Saji, B.and Chacko, A.S." Green Internet for Green Environment: Combating green house gases", Research journal of chemistry and environment, 2001, a-179, pp.64 Sinha, R.,: Carbon Sequestration Through Forestry - A Win Win Opportunity (137): Indian Journal Of Environmental Protection, vol 25,number 2, feb 2005 . John Browne, Beyond Kyoto, Foreign Affairs, July/August 04 US, National Oceanic and Atmospheric Administration, "Global Warming" 2001 Print Media: Links: The Economic Times, ET Big Bucks Investorees Guide/V01 No.2, Issue No.34/18 July 2005. UNITED NATIONS FRAMEWORK CONVENTION ON CLIMATE CHANGE http://unfccc.int/2860.php CLIMATE CHANGE http://www.climatechangenews.com UNFCCC http://unfccc.int/resource/docs/convkp/kpeng.html National Climatic Data Centre http://www.nrdc.org/globalWarming/default.asp http://www.epi.org/publication/issuebriefs_ib131/ http://www.globalclimate.org/factfigures/kyoto.html http://climate.wri.org/pubs_content_text.cfm?ContentID=2126 http://unfccc.int/files/essential_background/kyoto_protocol/application/pdf/ kpstats.pdf http://www.carbonventures.com/policy/policy_03.php
  20. ANNEXURES Afforestation The process of establishing and growing forests on bare or cultivated land which has not been forested in recent history. Baseline and Baseline Scenario The baseline represents the forecast emissions of a company, business unit or project, using a business as usual scenario, often referred to as the 'baseline scenario' i.e. expected emissions if the firm did not implement emission reduction activities. This forecast incorporates the economic, financial, technological, regulatory and political circumstances within which a firm operates. Carbon Dioxide Equivalent (C02eq) The universal unit of measurement used to indicate the global warming potential (GWP) of each of the 6 greenhouse gases. It is used to evaluate the impacts of releasing (or avoiding the release of) different greenhouse gases. Carbon Sink A carbon sink is a reservoir that can absorb or "sequester" carbon dioxide from the atmosphere. Forests are the most common form of sink, as well as soils, peat, permafrost, ocean water and carbonate deposits in the deep ocean. Commitment Period The five year Kyoto Protocol Commitment Period is scheduled to run from calendar year 2008 to calendar year 2012 inclusive. Credit The term 'Credits' are used in a number of contexts, most commonly in relation to Emission reductions that have been achieved in excess of the required amount for: Joint Implementation, also known as Emission Reduction Units (ERUs) or Clean Development Mechanism projects, specifically known as Certified Emission Reductions (CERs) CER (Certified Emission Reductions): A CER unit is equivalent to one ton of C02. The CER can be allotted in two different ways. One is a fixed crediting period of 10 years or first crediting period of 7 years which can be extended twice for a period of further seven years, however, subject to undergoing the project validation process again. ERU (Emission Reduction Units): Under the Kyoto Protocol, a specified amount of greenhouse gas emissions reductions achieved through a Joint Implementation project. Global Warming Potential (GWP) The GWP is an index that compares the relative potential of the 6 greenhouse gases to contribute to global warming i.e. The additional heat/energy which is retained in the Earth"s ecosystem through the release of this gas into the atmosphere. The additional heat/energy impact of all other greenhouse gases are compared with the impacts of Carbon dioxide (C02) and referred to in terms of a C02 equivalent (C02eq) i.e. Carbon dioxide has been designated a GWP of 1; Methane has a GWP of 23. The latest officially released GWP
  21. figures are available from the IPCC in their publication Climate Change 2001: The Scientific Basis. Intergovernmental Panel on Climate Change (IPCC) The World Meteorological Organization (WMO) and the United Nations Environment Program (UNEP) formed the Intergovernmental Panel on Climate Change (IPCC) in 1988. The IPCC represents the collective work of over 2,000 scientists, principally in the atmospheric sciences, but also comprising social, economic and other environmental components potentially impacted by climate change. Between its three Working Groups, the IPCC assesses the scientific and socio-economic aspects of human-induced climate change, as well as options for greenhouse gas reduction and other forms of climate change mitigation. Its Task Force on National Greenhouse Gas Inventories is responsible for overseeing the National Greenhouse Gas Inventories Program (NGGIP). The IPCC neither conducts original research nor monitors climate-related data, but its periodic assessment reports and technical papers play a very important role in the creation of climate change policies worldwide. The IPCC was instrumental in establishing the Intergovernmental Negotiating Committee for the United Nations Framework Convention on Climate Change (UNFCCC or the Convention) in 1992. Level and timing of proposed targets Party AOSIS Brazil Canada Czech Republic Democratic Republic of the Congo (Zaire) Target level and date (reductions from 1990) by 2005 by 2020 (differentiated) 3% by 2010, additional 5% by 2015 5% by 2005, by 2010 by by 2020 Gas(es) Date proposed covered 20 September C02 1994 C02, CH4, N20 28 May 1997 2 December All GHGs 1997 C02, CH4, N20 27 March 1997 All GHGs 23 October 1996
  22. France Germany G-77 and China Hungary et al. Japan New Zealand Peru Philippines Russian Federation at least 7.5% by 2005, by 2010 7-10% in average per capita emissions by 2010 (differentiated) by by 2010 at least 7.5% by 2005, by 2010, an additional 20% by 2020 Stabilization by 2005 plus pledging of differentiated targets 5% by 2008-2012 (differentiated) 5% in a 5 year period, starting no earlier than 2005 (C02) by 2005, 15-20% (all GHGs) by 2010 by 2005, by 2010 Stabilization by 2010 plus additional differentiated targets for "Annex B " Parties C02, CH4, N20 All GHGs C02 C02, CH4, N20 (gas-by-gas) C02, CH4, N20 C02, CH4,N20 C02, CH4, N20 see previous column All GHGs All GHGs 19 June 1997, 4 March 1997 6 December 1996 26 March 1996 22 October 1997 27 March 1997 6 October 1997 2 December 1997 7 March 1997 25 March 1997 26 February 1997
  23. Switzerland UK Table - Country by 2010 (differentiated) 5-10% by 2010 All GHGs All GHGs 29 November 1996 16 April 1996 : Countries included in Annex B to the Kyoto Protocol and their emissions tar ets. Latvia, EU-15* Bulgaria, Czech Republic, Estonia, Liechtenstein, Lithuania, Monaco, Romania, Slovakia, Slovenia, Switzerland Canada, Hungary, Japan, Poland Croatia New Zealand, Russian Federation, Ukraine Norway Australia Iceland Target -5% +1% +8% * The 15 States who were EU members in 1997 when the Kyoto Protocol was adopted, took on that 8% target that will be redistributed among themselves, taking advantage of a scheme under the Protocol known as a "bubble", whereby countries have different individual targets, but which combined make an overall target for that group of countries. The EU has already reached agreement on how its targets will be redistributed. ** Some Economies-in-Transition (EITs) have a baseline other than 1990. *** The US has indicated its intention not to ratify the Kyoto Protocol. Note: Although they are listed in the Convention's Annex I, Belarus and Turkey are not included in the Protocol ' s Annex B as they were not Parties to the Convention when the Protocol was adopted.
  24. Annual C02 Emissions (expressed in metric tons of carbon) 1,631 . 441 Top 10 Countries Germany Annual omissions Canada Q million U.K.Q S. Koteot3 Iran tC.h•na surpassed the United States in emissions on a monthly basis in summer 2006 Source: Gi Yarlnd. ITA goden, Andres. Carbon moxide Informaticft Analyse Center, flidge Laboratory, Department of Energy% Osk Ridge, Tennessee Annual Emissions by Country lin 200 and greeter 100-199 50-99 less than 20 no data data 'D 2008 Encyclopadla Britannica, Inc. Chart 2 Energy-oriented C02 Emissions inthe World in 2000 Others Mexico Frmce South" orea Germany Canada "dia UH. 3% Chia Russia Japan So wc e: OECD C02 Emissions from Fuel Combustion
  25. VVhat it carbon emissions were reduced? Sea Level Risc Cm} 0.35 0.3 0.25 0.2 0,15 0.1 0,05 2.5 Temperature change CO 2 0.5 1990 Carr•y on as usual atoo 00 Irmplerruent Kyoto (developed countries reduce ernissions Stabilise ermissions at 2000 levels globally Reduce ernissions globally 2.5 OSE Reduce ernissions globally 7.5 Ose

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