Carbon Economics 14.02

8/8/2019 Carbon Economics 14.02

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CARBON ECONOMICS

S. B. MAHAPATRASr. FACULTY, IICM,RANCHI


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Carbon Economics

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Economy

Envt. Social

S.Dev.


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Economic Parameter

Economics is the social science that studies theproduction, distribution & consumption ofgoods and services.

Car bon economics parameters in the line ofinternational economics comparativeadvantage, international finance & globalmovement of benefits. The car bon economics

primarily comes from mitigation obligations bythe developed countries.

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Kyoto Protocol

International Agreementlinkedto

UN FCCC. Conventionofparties (COP)

Marrakeshaccord

IPCC & UNEP

Annex 1 countries and non Annex 1(developing ) countries.

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Major Features of Kyoto

Sets binding target for 38 Industrialized

countries and European community forreducing greenhouse gas.

Common but differential responsibility.

Target Flexible mechanism

Co-operative Implementation Mechanism

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Emission Trading

AAUS - Parties (Annex B) with commitment haveaccepted target for limiting or reducing emission.These target are expressed as allowed amount or

assigned amount over 2008-12 commitmentperiod. The Allowed emissions are divided into

AssignedAmount Unit.

Article 17 of Kyoto Protocol Allows countriesthat have emission unit to spare emissionpermitted but not used to sell the excess to othercountries that are over their target. Other unit

which may be transferred ERU, CER.

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Emission Trading (cont.)

Clean Development Mechanism (CDM) :

Article 12 of the protocol allows a countrywith emission reduction project indeveloping countries. Such project can earn

saleable Certified Emission Reduction Uniteach equivalent to one tonne of carbondioxide reduction.

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Emission Trading (cont.)

Clean Development Mechanism (CDM) :* Four global CDM criteria as per Article 12

- Thevoluntary participation of country govt. ofrespective partner.

- Project result in real measurable and longterm benefit related to mitigation of climatechange.

- Reduction of GHG emission for the CDMproject should be additional to any that wouldoccur in absence ofCDM project.

- The project should satisfy the criteria for asustainable development contributions asdefined by the host country govt.

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Activities eligible for CDM project

Renewableenergyprojects.

Energy efficiency Fuel switching coal to natural gas, coal to

sustainable biomass, oil to gas.

Capture & destruction / use of methane

emission land fill site, oil gas and coalmining.

Emission reduction from industrial processes

Capture and destruction of GHG.

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Activities eligible as CDM project(cont)

Emission reductionoftransportsector

Afforestation, reforestation project

New construction/Expansion of existing plant

/processes using less green house gas intensivepractice.

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Steps in CDM Process

Stage I : P roject Design Document (PDD)

The project sponsor shall be required to develop aCDM project design document in the format approved

by CDM EB.

The main task in developing PDD w ould involve preparatorywork, general description of the project,

identifying project boundar y and identification ofleakages, assessment of various baselinemethodologies, estimation of project GHG emission.

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Steps in CDM Process (cont..)

Stage I : P roject Design Document (PDD)

Demonstration of various additionality of theproject

Estimation of potential streams ofCERs

Environmental ImpactAssessment for the project

Sustainability assessment of the project

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Stage I I : Host country approval

Project Sponsor is required to secure a Host

CountryApproval from the Designated NationalAuthority (DNA) hosted at Ministr y of Environment and Forests, Govt. ofIndia.

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Stage III : V alidation

Validation is the process of independentevaluation of a project activity by a Designated

Operational Entity against the requirements ofthe CDM.

The project sponsor is required to appoint anindependent third party for validation of theproject. (CDM-EB has approved certain entities e.g.DNV, TUV, SGS etc. as Designated Operating Entity(DOE) for undertakingvalidation. )

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Stage IV : A pproval of Baseline Methodology byCDM-EB

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StageV : Project Registration

Registration is the formal acceptance by the EB of a

validated project as a CDM project activity. Registrationis the prerequisite for the verification, certification andissuance ofCER related to the project activity.

Validated project is required to be registeredwith CDM-EB ofUNFCCC. This is the responsibility of the DOE andthe project sponsor is required to pay a registration fee.

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StageVI : Monitoring andverification

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Stage VII : Issuance of CERsThe certification report, submitted by the DOEto CDM-EB/Registrar, shall constitute a

request for issuance to the Executive Board ofCERs equal to the verified amount ofreductions of anthropogenic emissions bysources of greenhouse gases.

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Additionality

Reduction in concentration of greenhouse gas inthe atmosphere can be achieved through reductionor absorption (sequestration).

The proposed CDM project as per criteria shouldnot only result in reduction (sequestration) ofGHG, but reduction beyond those that would havebeen occurred in absence ofCDM project activity

test for additionality. Even in the absence of CDM, an economy is likelyto witness more efficient energy use - the case isnot additional - Wind Mill case.

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Barrier Analysis

Investment barrier Unless a CDM project,

nobodywould like to fund the project i.e. theprojectwill never come up.

No private capital f rom domestic orinternational capital market due to real or

perceived risk associated with investment in acountry where t h e project activity is to beimplemented as demonstrated by the creditrating of the particular country.

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Carbon Market

The car bon market has been developedprimarily for meeting the emission cap.

Out of the total registered CDM project, 25%belongs to India and Indias share in the CERisonly 16 %.

CDM project reduces 220 million tonne of CO2equivalent peryear.

All over theworld another 3000+ project in thepipe line. These will reduce CO2 emission byover 2.5billion tonne by the end of2012.

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Carbon Market (cont)

Total no. of projects registered with UNFCCC

1750 Total no. ofregistered project in India 430

Total no. CERs issued annually to IndianProjects 35 Mn

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Carbon Market (cont.)

Afewof the Indian companieswho has already

beenr

egister

ed SRF L

td, S

uzlon Ener

gy,

Shriram EPC, Gujrat Flourochemical, JSW,RIL, APCL Electricity Generation Project withcleaner fuel (natural gas)

Water pump energy efficiency improvement inmunicipal water utilities in Karnataka, Powerfactor correction inwater pump.

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Carbon Market (cont.)

5.6 M W municipal solid waste treatment cum

ener

gy gener

ation, L

ucknow, I

ndia.

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Agenciesinvolvedincarbonmarket

Carbon market consultant / DOE / Financer KPMG, ICF International, Price WaterhouseCooper, CMD Securities, ECO Securities,

ABNAMRO, Barclays Capital, DNV Norway presently it is validating Pansan Coal Mine

methane utilization & destruction, Nanshancoal mine methane utilization, Fuxin coal minemethane utilization, Huainan coal minemethane utilization.

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CDM projects requires complexdocumentation and monitoring with

significant cost involvement.CDM accounts for 88% of thewholevalue of

project based market. In the month ofAug. the car bon market

price of EUA& CERare as under :EUA Contract 2008 Last trade 23.59(Euro)

CER Spot 2008 20.15CER Future Dec. 2008 21.43

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Case study Company: Ennore Coke Limited, Haldia,West Bengal

Business: Cokemanufacturing Capacity: 1.3 lakh tonne/annumexpandingto4.8 lakh tonne per

annum.

Useoftheproduct: Ironandsteelfoundering Baseline:WastageofthecokeovenflueGas(COFG): power comes

fromgridfor operation Activity:

Thecompanyisusingthe wasteheatofthe COFGcomingoutofthemanufacturingprocess.

ThegasisintroducedinWaste Heat RecoveryBoiler.

The Boiler generatessuper heatedsteam.

Steamisutilisedin Steam TurboGenerator for generating12 MWpower. Emission reductionper annum66049 metrictonne.

Creditperiod10years

Total CER660000

Total CER worth/annum Rs.4.6crore (@$15/CER)

Paybackperiodoneyear.

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Approximate cost range for CDMrelated projectsCost Factor RangeCDM documentation (Euro) 50,000 200,000

Project validation (Euro) 10,000 20,000

Additionalmonitoring&equipment (Euro) 0 50,000Registration (US$)

Verysmall (200,000) 30,000

Annual verification (Euro) 10,000 20,000

Issuance (US$) 0.20 / CER

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Carbon Trading

Particular MT MUSD MT MUSD

EUET 1104 24436 2061 50097

NSW 20 225 25 224

Chicago 10 38 23 72

Total 1134 24699 2109 50394

PrimaryCDM 537 5804 551 7426

Sec. CDM 2 445 240 5451JI 16 141 41 499

Others (VER, RUMetc.)

33 146 42 265

Total 611 6536 874 13641

G.Total 1745 31235 2983 64035

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Thank you!

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Documents

Carbon Economics 14.02