Description
A carbon credit is a generic term for any tradable certificate or permit representing the right to emit one tonne of carbon dioxide or the mass of another greenhouse gas with a carbon dioxide equivalent (tCO2e) equivalent to one tonne of carbon dioxide.
Carbon Credit – For Environmental Management
- Prof. Anand Wadadekar
SAMVIT School of Infrastructure Business
What do we mean by Environmental Management?
• Environmental management is not merely managing the environment but it’s the management of human interaction with; and impact upon the environment in order to conserve the environment for mankind’s sake. Managing environment is the biggest issue these days which is being faced by everyone everywhere across the globe. It has now become essential for companies to make environmental considerations as a part of their business decision making.
• It is observed that mere compliance of environmental law on paper does not result in effective control of pollution. An alternate paradigm for pollution abatement for more effective methods of environmental control beyond traditional "command-and-control (CAC)" style regulation is to use economic instruments (EIs) or market-based instruments (MBIs).
• In India, environmental management is largely carried out at the state level. This is true for natural resources such as forests and land as well as for air, water quality and solid waste pollution.
SAMVIT School of Infrastructure Business
Market Based Instruments (MBI) for Environmental Benefits
“Market Based Instruments refer to the environmental policies which encourage change in technology, behaviour or products through financial incentives like subsidies, taxes, price differentiation or market creation.”
SAMVIT School of Infrastructure Business
CARBON CREDIT – As one of the most effective MBI
• Kyoto Protocol • What does ‘Carbon Credit’ mean? • Credit v/s Taxes • Indian Initiatives for Environmental Management • What can we do? - At the organisation level and at individual level…
SAMVIT School of Infrastructure Business
Kyoto Protocol
• The ’Kyoto Protocol’ is a protocol to the United Nations Framework Convention on Climate Change (UNFCCC or FCCC), aimed at fighting global warming. The UNFCCC is an international environmental treaty with the goal of achieving the "stabilisation of greenhouse gas concentrations in the atmosphere at a level that would prevent dangerous anthropogenic interference with the climate system. • The Protocol was initially adopted on 11 December 1997 in Kyoto, Japan, and entered into force on 16 February 2005. As of September 2011, 191 states have signed and ratified the protocol. In December 2011, Canada denounced the Protocol. • India is a signatory to the Kyoto Protocol.
SAMVIT School of Infrastructure Business
What does Carbon Credit mean?
• A Carbon Credit is a generic term for any tradable certificate or permit representing the right to emit one ton of carbon dioxide. Credits are awarded to countries or groups that have reduced their green house gases (GHG) below their emission quota. A nation that finds it hard to meet its target of reducing GHG could pay another nation to reduce emissions by an appropriate quantity. • For example, if an environmentalist group plants enough trees to reduce emissions by one ton, the group will be awarded a credit. If a steel producer has an emissions quota of 10 tons, but is expecting to produce 11 tons, it could purchase this carbon credit from the environmental group. The carbon credit system looks to reduce emissions by having countries honor their emission quotas and offer incentives for being below them. • Simply put, one carbon credit is equivalent to one ton of carbon dioxide or its equivalent greenhouse gas (GHG). Carbon credits are “Entitlement Certificates” issued by the United Nations Framework Convention on Climate Change (UNFCCC) to the implementers of the approved Clean Development Mechanism (CDM) projects.
SAMVIT School of Infrastructure Business
Credits versus Taxes
• Credits were chosen by the signatories to the Kyoto Protocol as an alternative to Carbon taxes. • A drawback of tax-raising schemes is that, some or all of the taxation raised by a government may be applied inefficiently or not used to benefit the environment. • By treating emissions as a 'market commodity' it becomes easier for business to understand and manage their activities, while economists and traders can attempt to predict future pricing using well understood market theories. Thus the main advantages of a tradable carbon credit over a carbon tax are: 1. the price is more likely to be perceived as fair by those paying it, as the cost of carbon is set by the market, and not by politicians. Investors in credits have more control over their own costs. 2. the flexible mechanisms of the Kyoto Protocol ensure that all investment goes into genuine sustainable carbon reduction schemes, through its internationally-agreed validation process.
SAMVIT School of Infrastructure Business
Indian Initiatives for Environment Management
• Comparing the globally placed carbon trade, India seems nowhere near. However, Policy Statement for Abatement of Pollution, 1992 by the Government of India favours the use of MBIs for pollution control, wherever feasible. In the recent years, compulsion to comply with Euro II emission norms is a very confident step towards controlling air pollution. • The enactment of the Information Technology Act, 2000 has enabled the industry to kick-start the use of electronic mode as a valid legal medium for carrying out its business operations which were until now done compulsorily on paper. This includes initiatives like MCA e-filing, Income Tax e-filing, SEBI Reporting and other electronic communications via, emails and video conferencing. • Currently companies like Jindal Stainless, Essar Steel, Hyderabad Chemicals, Paschim Hydro Energy P. Ltd, The Andhra Pradesh Paper Mills Ltd, have been making use of market based instruments like Carbon Credits in their businesses.
SAMVIT School of Infrastructure Business
What can we do?
It is a need of the hour for professionals like Company Secretaries, Chartered Accountants, Lawyers, Cost Accountants and other Management professionals to put up their say in the management of their respective organisations (financial, manufacturing or services) and be a part of the decision making more proactively & aggressively.
SAMVIT School of Infrastructure Business
At the organisation level
• Industry Chambers like FICCI, ASSOCHAM, CII, MCCIA need to take-up the issue of introducing market based instruments through a legal framework with the Government. These trade organizations can also come up with some award program to the Companies which religiously follow the norms. Such award program will work as a motivating factor in the industry to adopt the norms suo-moto. • Introduction of corporate-run carbon funds and Govt. run carbon programmes • Awards like ‘Best Green Idea’ for employees coming up with suggestions; ideas, ways, etc. should be introduced. • Computer-based entrance tests for educational courses.
SAMVIT School of Infrastructure Business
Contd…
• Organizations can also come up with policies for reducing wastes like for encouragement of use of metal water bottle in the organization in place of plastic water bottles which is sanitary, easy to clean and is capable of being used over and over. • Organizations can also encourage use of reusable lunch bags / cups etc. in their cafeteria / lunch rooms which helps in avoiding use of plastic / paper, use of hand towels in toilets and lunch rooms instead of paper towels and electric dryers. • Multi-Commodity Exchange (MCX) has taken a pioneering effort to launch Carbon Credit Futures in India in January 2008 and has been recognized as India’s First Green Exchange. This has enabled Indian owners of Clean Development Mechanism (CDM) projects under the Kyoto Protocol to sell the carbon credits they have earned, at the correct market prices without having to negotiate or bargain. This has done away with many of the problems Indian SMEs faced in the global carbon credits market.
SAMVIT School of Infrastructure Business
Contd…
• Further, National Commodity and Derivatives Exchange (NCDEX) also launched a futures contract for carbon credit issued under United Nations Framework Convention on Climate Change on its exchange platform in April 2008. NCDEX is the second exchange in the country after MCX which started carbon credits futures. • The industry participation does not quite look encouraging right now, however looking at the growing environmental concerns across the globe, the carbon credits trading is sure to catch momentum in the years to come. • Some More???
SAMVIT School of Infrastructure Business
On individual level
• We can help our respective organizations in implementing effective waste management systems. We can also assist in registering our manufacturing units under Indian Green Building Council and products under Bureau of Energy Efficiency voluntarily; though for some the registration is mandatory. • Internal policies may also help in encouraging paperless communications, use of common transport etc. as far as possible. Such policies may at least ensure minimum use of paper (double side printing), avoidance of wastage and re-cycling of waste paper and therefore, saving trees – a natural resource. • We can also assist in encouraging our fellows in full utilization of software applications, for example execution of daily work in soft copies rather than printing (Eg. Excel Macros for data processing, analysis, etc.). This way, we will solve two problems i.e. space for storage of physical records and availability/ accessibility of all records at a centralized server hence, reducing dependence on human factor. We all are aware that most of the official communications can be done through email/video conferences. We professionals can advise our managements / fellow employees to adopt such practices.
SAMVIT School of Infrastructure Business
Contd…
• We need to refer to many laws for which we purchase bulky books every year. Here, we can purchase CDs instead of those books, which will reduce substantial use of paper and storage and will be easy to use. • We can also adopt and advise good practices of reducing carbon footprint for example using CNG gas in our cars, maximum use of public transport system. • We can advise our managements to come up with policies to reduce wastages, be it paper, electricity or any other. Policies on travels can also be modified to discourage air travel at all levels of management. A small change can add a big thing to the concept of “Go Green”.
SAMVIT School of Infrastructure Business
Conclusion
• According to industry estimates, Indian companies are expected to generate at least $8.5 billion at the going rate of $10 per ton of CER (Certified Emission Reduction). Tata Sponge Iron Ltd got a CDM certificate from the UN for its waste heat recovery project in Orissa. Reliance Energy already has energy efficiency and process development CDM projects. • It’s the need of the hour to think very seriously on reducing environment loss by religiously following & implementing and innovating techniques & ways to contain the same. This is a high time to call a revolution for reducing carbon footprint in order to preserve what’s left of the ozone layer, which is a protective layer between sun’s harsh ultra violet rays and the living beings. Otherwise, the day is not far when the world will be full of hunger; sun burnt, blind people, scary sounds and many more incurable diseases.
SAMVIT School of Infrastructure Business
doc_713246791.pdf
A carbon credit is a generic term for any tradable certificate or permit representing the right to emit one tonne of carbon dioxide or the mass of another greenhouse gas with a carbon dioxide equivalent (tCO2e) equivalent to one tonne of carbon dioxide.
Carbon Credit – For Environmental Management
- Prof. Anand Wadadekar
SAMVIT School of Infrastructure Business
What do we mean by Environmental Management?
• Environmental management is not merely managing the environment but it’s the management of human interaction with; and impact upon the environment in order to conserve the environment for mankind’s sake. Managing environment is the biggest issue these days which is being faced by everyone everywhere across the globe. It has now become essential for companies to make environmental considerations as a part of their business decision making.
• It is observed that mere compliance of environmental law on paper does not result in effective control of pollution. An alternate paradigm for pollution abatement for more effective methods of environmental control beyond traditional "command-and-control (CAC)" style regulation is to use economic instruments (EIs) or market-based instruments (MBIs).
• In India, environmental management is largely carried out at the state level. This is true for natural resources such as forests and land as well as for air, water quality and solid waste pollution.
SAMVIT School of Infrastructure Business
Market Based Instruments (MBI) for Environmental Benefits
“Market Based Instruments refer to the environmental policies which encourage change in technology, behaviour or products through financial incentives like subsidies, taxes, price differentiation or market creation.”
SAMVIT School of Infrastructure Business
CARBON CREDIT – As one of the most effective MBI
• Kyoto Protocol • What does ‘Carbon Credit’ mean? • Credit v/s Taxes • Indian Initiatives for Environmental Management • What can we do? - At the organisation level and at individual level…
SAMVIT School of Infrastructure Business
Kyoto Protocol
• The ’Kyoto Protocol’ is a protocol to the United Nations Framework Convention on Climate Change (UNFCCC or FCCC), aimed at fighting global warming. The UNFCCC is an international environmental treaty with the goal of achieving the "stabilisation of greenhouse gas concentrations in the atmosphere at a level that would prevent dangerous anthropogenic interference with the climate system. • The Protocol was initially adopted on 11 December 1997 in Kyoto, Japan, and entered into force on 16 February 2005. As of September 2011, 191 states have signed and ratified the protocol. In December 2011, Canada denounced the Protocol. • India is a signatory to the Kyoto Protocol.
SAMVIT School of Infrastructure Business
What does Carbon Credit mean?
• A Carbon Credit is a generic term for any tradable certificate or permit representing the right to emit one ton of carbon dioxide. Credits are awarded to countries or groups that have reduced their green house gases (GHG) below their emission quota. A nation that finds it hard to meet its target of reducing GHG could pay another nation to reduce emissions by an appropriate quantity. • For example, if an environmentalist group plants enough trees to reduce emissions by one ton, the group will be awarded a credit. If a steel producer has an emissions quota of 10 tons, but is expecting to produce 11 tons, it could purchase this carbon credit from the environmental group. The carbon credit system looks to reduce emissions by having countries honor their emission quotas and offer incentives for being below them. • Simply put, one carbon credit is equivalent to one ton of carbon dioxide or its equivalent greenhouse gas (GHG). Carbon credits are “Entitlement Certificates” issued by the United Nations Framework Convention on Climate Change (UNFCCC) to the implementers of the approved Clean Development Mechanism (CDM) projects.
SAMVIT School of Infrastructure Business
Credits versus Taxes
• Credits were chosen by the signatories to the Kyoto Protocol as an alternative to Carbon taxes. • A drawback of tax-raising schemes is that, some or all of the taxation raised by a government may be applied inefficiently or not used to benefit the environment. • By treating emissions as a 'market commodity' it becomes easier for business to understand and manage their activities, while economists and traders can attempt to predict future pricing using well understood market theories. Thus the main advantages of a tradable carbon credit over a carbon tax are: 1. the price is more likely to be perceived as fair by those paying it, as the cost of carbon is set by the market, and not by politicians. Investors in credits have more control over their own costs. 2. the flexible mechanisms of the Kyoto Protocol ensure that all investment goes into genuine sustainable carbon reduction schemes, through its internationally-agreed validation process.
SAMVIT School of Infrastructure Business
Indian Initiatives for Environment Management
• Comparing the globally placed carbon trade, India seems nowhere near. However, Policy Statement for Abatement of Pollution, 1992 by the Government of India favours the use of MBIs for pollution control, wherever feasible. In the recent years, compulsion to comply with Euro II emission norms is a very confident step towards controlling air pollution. • The enactment of the Information Technology Act, 2000 has enabled the industry to kick-start the use of electronic mode as a valid legal medium for carrying out its business operations which were until now done compulsorily on paper. This includes initiatives like MCA e-filing, Income Tax e-filing, SEBI Reporting and other electronic communications via, emails and video conferencing. • Currently companies like Jindal Stainless, Essar Steel, Hyderabad Chemicals, Paschim Hydro Energy P. Ltd, The Andhra Pradesh Paper Mills Ltd, have been making use of market based instruments like Carbon Credits in their businesses.
SAMVIT School of Infrastructure Business
What can we do?
It is a need of the hour for professionals like Company Secretaries, Chartered Accountants, Lawyers, Cost Accountants and other Management professionals to put up their say in the management of their respective organisations (financial, manufacturing or services) and be a part of the decision making more proactively & aggressively.
SAMVIT School of Infrastructure Business
At the organisation level
• Industry Chambers like FICCI, ASSOCHAM, CII, MCCIA need to take-up the issue of introducing market based instruments through a legal framework with the Government. These trade organizations can also come up with some award program to the Companies which religiously follow the norms. Such award program will work as a motivating factor in the industry to adopt the norms suo-moto. • Introduction of corporate-run carbon funds and Govt. run carbon programmes • Awards like ‘Best Green Idea’ for employees coming up with suggestions; ideas, ways, etc. should be introduced. • Computer-based entrance tests for educational courses.
SAMVIT School of Infrastructure Business
Contd…
• Organizations can also come up with policies for reducing wastes like for encouragement of use of metal water bottle in the organization in place of plastic water bottles which is sanitary, easy to clean and is capable of being used over and over. • Organizations can also encourage use of reusable lunch bags / cups etc. in their cafeteria / lunch rooms which helps in avoiding use of plastic / paper, use of hand towels in toilets and lunch rooms instead of paper towels and electric dryers. • Multi-Commodity Exchange (MCX) has taken a pioneering effort to launch Carbon Credit Futures in India in January 2008 and has been recognized as India’s First Green Exchange. This has enabled Indian owners of Clean Development Mechanism (CDM) projects under the Kyoto Protocol to sell the carbon credits they have earned, at the correct market prices without having to negotiate or bargain. This has done away with many of the problems Indian SMEs faced in the global carbon credits market.
SAMVIT School of Infrastructure Business
Contd…
• Further, National Commodity and Derivatives Exchange (NCDEX) also launched a futures contract for carbon credit issued under United Nations Framework Convention on Climate Change on its exchange platform in April 2008. NCDEX is the second exchange in the country after MCX which started carbon credits futures. • The industry participation does not quite look encouraging right now, however looking at the growing environmental concerns across the globe, the carbon credits trading is sure to catch momentum in the years to come. • Some More???
SAMVIT School of Infrastructure Business
On individual level
• We can help our respective organizations in implementing effective waste management systems. We can also assist in registering our manufacturing units under Indian Green Building Council and products under Bureau of Energy Efficiency voluntarily; though for some the registration is mandatory. • Internal policies may also help in encouraging paperless communications, use of common transport etc. as far as possible. Such policies may at least ensure minimum use of paper (double side printing), avoidance of wastage and re-cycling of waste paper and therefore, saving trees – a natural resource. • We can also assist in encouraging our fellows in full utilization of software applications, for example execution of daily work in soft copies rather than printing (Eg. Excel Macros for data processing, analysis, etc.). This way, we will solve two problems i.e. space for storage of physical records and availability/ accessibility of all records at a centralized server hence, reducing dependence on human factor. We all are aware that most of the official communications can be done through email/video conferences. We professionals can advise our managements / fellow employees to adopt such practices.
SAMVIT School of Infrastructure Business
Contd…
• We need to refer to many laws for which we purchase bulky books every year. Here, we can purchase CDs instead of those books, which will reduce substantial use of paper and storage and will be easy to use. • We can also adopt and advise good practices of reducing carbon footprint for example using CNG gas in our cars, maximum use of public transport system. • We can advise our managements to come up with policies to reduce wastages, be it paper, electricity or any other. Policies on travels can also be modified to discourage air travel at all levels of management. A small change can add a big thing to the concept of “Go Green”.
SAMVIT School of Infrastructure Business
Conclusion
• According to industry estimates, Indian companies are expected to generate at least $8.5 billion at the going rate of $10 per ton of CER (Certified Emission Reduction). Tata Sponge Iron Ltd got a CDM certificate from the UN for its waste heat recovery project in Orissa. Reliance Energy already has energy efficiency and process development CDM projects. • It’s the need of the hour to think very seriously on reducing environment loss by religiously following & implementing and innovating techniques & ways to contain the same. This is a high time to call a revolution for reducing carbon footprint in order to preserve what’s left of the ozone layer, which is a protective layer between sun’s harsh ultra violet rays and the living beings. Otherwise, the day is not far when the world will be full of hunger; sun burnt, blind people, scary sounds and many more incurable diseases.
SAMVIT School of Infrastructure Business
doc_713246791.pdf