CARBON CREDITS&

ITS TRADING

Prepared By: Jatin Shah

Pratik Jariwala

Contributors to CO2!

CARBON CREDIT

1 CARBON CREDIT ≈ 1 ton of CO2 or its equivalent greenhouse gas (GHG) which is an entitled certificate by UNFCCC.

United Nations FrameworkConvention on Climate Change

Act signed by 165 nations in 1992 at Rio de Janeiro.

Annex 1 & Non-Annex 1 countries.

Annex 1 (developed countries) agreed to reduce their GHGs by 5.2% below 1990 levels in 1st commitment period 2008 – 2012.

KYOTO Protocol

7

Annex INon-Annex I

Not ratified

Non -Annex-1

IndiaBangladeshBrazilChinaAfghanistanAlgeriaNepalArgentinaBoliviaSrilankaPakistanMalaysiaMauritius

Annex I

Australia(Not ratified)AustriaBelgiumMonacoCanadaNetherlandNew zealandUnited KingdomGermanySpainSwitzerlandGreece

from

Price Influencing Factors

Supply-demand mismtch Policy issues Crude oil prices Coal prices CO2 emissions European Union Allowances (EUAs) prices Foreign exchange fluctuations Global economic growth

An Example..

British Petroleum in UK emitting more than the accepted norms of UNFCCC.

Tie up with a subsidiary in India or China under CDM.The credits arising out of the use of the new technology

are sold to counterparts in Europe.Thus a carbon credit market is created.

INDIAN SCENARIO

INDIAN SCENARIO

Conditions In INDIA

No fixed norms of emission reduction by government. Potential Participants

Registry

India’s Potential

India – Non Annex I country, has a large scope in emissions trading.

India and China together contribute to $5 billion of the global carbon trade estimated at $30billion.

One of the leading generators of CERs through CDM.

Hedging The Price Risk – An Example

Carbon Credit Traders In India

Andhyodaya Green Energy

Grasim Industries Ltd. Indo Gulf Fertilizers Indus Technical &

Financial Consultants Ltd

Madhya Pradesh Rural Livelihoods Project

Rajasthan Renewable Energy Corporation

Reliance Energy Ltd. Tata Motors Limited Tata Steel Limited Bajaj Finserv Limited  Dhariwal Industries Ltd Tata Power Company

Limited BlueStar Energy Services

Inc. Valera Global Inc.

Suppose ABC Co. wants to buy carbon credits at the end of year 2008. The current price is Rs.1300 per ton and it expects the prices to up Rs.1400 per ton .To save itself from such Rs.1500 ton increase in price, the company decides to hedge on exchange platform.

A COMPANY ABC CO.

THANK YOUTHANK YOU