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 A Project
Made By:-

Priyanka Kashap – 15

Afsha Ratansi - 29
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Nupur Saraf - 30

Ritika Shetty - 34

Acknowledgment

Written words have an immense tendency to

generate a genuine gratitude to one’s eye. The
same is also to our project. We would be playing
mean if we do not bring to the notice of the people
who have helped us to complete our project. We
would firstly thank our college and sincerely thank
our Principal Sir Prof. A.E. Ladkdawala and Vice
Principal Prof. Kamala Arunachalam for providing
us support.

We take this opportunity to highlight the

valuable contribution of our BMS coordinator Prof.
Renu Khandelwal for her constant encouragement.
Also we would like to thank Prof. Salma for giving
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us the required guidance and for helping us to
complete this project.

We would also like to thank all those we have

forgotten to mention in this space .Last but not the
least we would like to thank THE ALMIGHTY GOD
for giving us the undying spirit which helped us to
complete the project

Introduction:
The dramatic imagery of global warming
frightens people. Melting glaciers, freak storms and
stranded polar bears -- the mascots of climate
change -- show how quickly and drastically
greenhouse gas emissions (GHG) are changing our
planet. Such graphic examples, combined with the
rising price of energy, drive people to want to
reduce consumption and lower their personal
shares of global emissions. But behind the
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emotional front of climate change lies a developing
framework of economic solutions to the problem.
Two major market-based options exist, and
politicians around the world have largely settled on
carbon trading over its rival, carbon tax, as the
chosen method to regulate GHG emissions.

Meaning of Carbon trading:

Carbon trading is a complex system which sets
itself a simple goal: to make it cheaper for
companies and governments to meet emissions
reduction targets – although, as we will show,
emissions trading is designed in such a way that
the targets can generally be met without actual
reductions taking place. Carbon trading takes two
main forms: ‘cap and trade’ and ‘off setting’.

How does Carbon Trading work?

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 Carbon trading, sometimes called emissions
trading, is a market-based tool to limit GHG. The
carbon market trades emissions under cap-and-
trade schemes or with credits that pay for or
offset GHG reductions. Cap-and-trade schemes are
the most popular way to regulate carbon dioxide
(CO2) and other emissions. The scheme's
governing body begins by setting a cap on
allowable emissions. It then distributes or auctions
off emissions allowances that total the cap.
Member firms that do not have enough allowances
to cover their emissions must either make
reductions or buy another firm's spare credits.
Members with extra allowances can sell them or
bank them for future use. Cap-and-trade schemes
can be either mandatory or voluntary.
A successful cap-and-trade scheme relies on a
strict but feasible cap that decreases emissions
over time. If the cap is set too high, an excess of
emissions will enter the atmosphere and the
scheme will have no effect on the environment. A
high cap can also drive down the value of
allowances, causing losses in firms that have
reduced their emissions and banked credits. If the
cap is set too low, allowances are scarce and
overpriced. Some cap and trade schemes have
safety valves to keep the value of allowances
within a certain range. If the price of allowances
gets too high, the scheme's governing body will
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release additional credits to stabilize the price. The
price of allowances is usually a function of supply
and demand. Credits are similar to carbon offsets
except that they're often used in conjunction with
cap-and-trade schemes. Firms that wish to reduce
below target may fund pre approved emissions
reduction projects at other sites or even in other
countries.

There are two types of Carbon trading. They are

Mandatory Carbon Trading and Voluntary Carbon
Trading

Mandatory Carbon Trading

The Kyoto Protocol, an international treaty on
climate change that came into force in 2005,
dominates the mandatory carbon market. It serves
as both a model and a warning for every emerging
carbon program.

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In the early 1990s,
nearly every member
state of the United
Nations resolved to
confront global warming
and manage its
consequences. Although AP Photo/Itsuo Inouye
the resulting United U.N. Secretary-
Nations Framework General Kofi Annan
Convention on Climate marking the Kyoto
Change (UNFCCC) Protocol's entry
international treaty into force in February
recognized a unified 2005.
resolve to slow global
warming, it set only loose goals for lowering
emissions. In 1997, the Kyoto amendment
strengthened the convention.
Under the Protocol, members of the convention
with industrialized or transitional economies
(Annex I members) receive specific reduction
targets. Member states with developing economies
are not expected to meet emissions targets -- an
exception that has caused controversy because
some nations like China and India produce
enormous levels of GHG. The Protocol commits
Annex I members to cut their emissions 5 percent
below 1990 levels between 2008 and 2012.

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But because the Protocol does not manage the way
in which members reduce their emissions, several
mechanisms have arisen. The largest and most
famous is the European Trading Scheme (ETS),
still in its two-year trial phase.
The ETS is mandatory across the European Union
(EU). The multi sector cap and trade scheme
includes about 12,000 factories and utilities in 25
countries [source: Europe]. Each member state
sets its own emissions cap, or national allocation
plan, based on its Kyoto and national targets.
Countries then distribute allowances totaling the
cap to individual firms. Even though countries
distribute their own allowances, the allowances
themselves can be traded across the EU.
Independent third parties verify all emissions and
reductions. There has been, however, some
question as to whether the ETS has actually helped
reduce emissions. Some people even call it a
"permit to pollute" because the ETS allows
member states to distribute allowances free of
charge [source: BBC News]. The ETS also excludes
transport, homes and public sector emissions from
regulation. And as with all cap-and-trade schemes,
governments can essentially exempt influential
industries by flooding them with free
allowances.The ETS allows its members to earn
credits by funding projects through two other
Kyoto mechanisms: the Clean Development
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Mechanism (CDM) and Joint Implementation (JI).
CDM allows Annex I industrialized countries to pay
for emissions reduction projects in poorer countries
that do not have emissions targets. By funding
projects, Annex I countries earn certified emissions
reduction (CER) credits to add to their own
allowances. JI allows Annex I parties to fund
projects in other Annex I countries.

The Kyoto Protocol expires in 2012. Lawmakers

around the world are rushing to analyze its
achievements and shortcomings and negotiate a
successor. The United States, Kyoto's most famous
holdout, lacks any national mandatory carbon
legislation but, ironically, has a booming voluntary
carbon market. In the next section we'll learn
about the Chicago Climate Exchange

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Voluntary Carbon Trading

Scott Olson/AFP/Getty Images

Dr. Richard Sandor (center), chairman and CEO of
the CCX, speaks with U.S. Secretary of Energy
Spencer Abraham (left) and Chicago Mayor Richard

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Daley after the CCX’s first allowance auction in
2003.
The Clinton administration helped develop the
Kyoto Protocol. But when it came time to ratify the
treaty in 2001, the United States chose not to. The
government believed that Kyoto was fatally flawed
and could cause economic havoc [source:
Washington Post]. Not all Americans agreed,
however. In 2005, 132 of the nation's mayors
pledged to meet Kyoto-like emissions targets.
Many cited the economic consequences of
dwindling water supplies and rising oceans.
Some cities and companies took action even
earlier. In 2003, Dr. Richard Sandor founded the
Chicago Climate Exchange (CCX), a voluntary
carbon market. Members of the CCX willingly join
the pooled commodity but commit to legally
binding reductions. Since the CCX is voluntary, all
sorts of organizations have joined: companies,
universities and even cities. Michigan State, Ford,
DuPont and the cities of Chicago and Portland,
Ore., are among its members.
Like other cap-and-trade programs, the CCX sets a
limit on total allowable emissions and issues
allowances that equal the cap. Member firms then
trade the allowances -- carbon financial
instruments (CFIs) -- amongst themselves. Each
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CFI equals 100 metric tons of CO2 equivalent.
Members that meet their targets can sell or bank
their allowances. Firms can also generate CFIs,
specifically exchange offsets, by funding approved
GHG reduction projects outside of the pool. In
2006, CCX traded a total of 10.2 million tons of
CO2 [Climate Exchange, Plc]. Because CCX is
owned by an independent, publicly traded
company, it's free from the federal regulations that
can bog down mandatory carbon trading schemes.
Make It Rain
The United States has actually had a national cap-
and-trade scheme for years -- it's just not a cap on
carbon. The Acid Rain Program limits the amount of
sulfur dioxide (SO2) that power plants in the
contiguous United States can produce. Plants can
reduce their emissions and trade the allowances.
The program has worked: it has a high rate of
compliance, and power plant emissions have
dropped 50 percent below what they were in 1980.
The final 2010 cap will be 8.95 million tons allowed
per year [source: EPA].

Like Kyoto or the ETS, the CCX has two phases of

implementation. In the first phase, which ran from
2003 to 2006, members committed to reducing
emissions by only 1 percent per year below their
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baselines. In the second phase, which will run from
2007 to 2010, members will reduce emissions 6
percent below their baselines.

Although the CCX's high cap has drawn criticism,

the pooled commodity's true benefit may end up
being the market-based practice it provides its
members. Cities across the country have already
created municipal carbon schemes. Some states
are fashioning mandatory carbon markets for
utilities. The United States is very likely headed
toward some form of national carbon legislation.
When such a time comes, members of the CCX will
have the valuable advantage of experience.
Carbon trading and other market-based schemes
add a needed dose of economic practicality to the
emotionally charged issue of global warming. They
help change the way we think about emissions,
energy efficiency and the environment.

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Why Did Carbon Trading Emerge? :
Something that began as an effort to drive away
greenhouse gases from the atmosphere has paved
the way for a business opportunity. The Kyoto
Protocol, adopted in 1997 to reduce greenhouse
gases that cause global warming, came into force
in 2005:
The protocol has been ratified by 175 countries,
including those in the European Union, Japan,
Canada and Russia.
This has set legally binding targets for the
countries to reduce their greenhouse gas emission
by 5.2 per cent, from the 1990 levels, by 2012.
This protocol provides three mechanisms to
developed nations to meet their emission targets:
Joint implementation among the developed
nations: Allows industrialized countries with a
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greenhouse gas reduction commitment to invest in
emission reducing projects in another
industrialized country as an alternative to emission
reductions in their own countries.
The Clean Development Mechanism provides
developed nations with CERs for implementing
carbon emission reduction projects in developing
nations. Developed countries can use the CERs
generated by such projects to meet their emission
targets under the protocol. Emission trading
among the developed nations under which a
central authority sets a limit or cap on the amount
of a pollutant that can be emitted. Companies or
other groups that emit greenhouse gases are
required to hold an equivalent number of credits or
allowances representing the right to emit a specific
amount. The total amount of credits cannot exceed
the cap, limiting total emissions to that level.
Companies that need to increase their emissions
must buy credits from those which emit less.

Carbon Trading Mechanism

Emissions trading is an administrative approach
used to control pollution by providing economic
incentives for achieving reductions in the
emissions of pollutants. The development of a
carbon project that provides a reduction in
Greenhouse Gas emissions is a way by which
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participating entities may generate tradeable
carbon credits. Say a company in India can prove it
has prevented the emission of x-tonnes of carbon,
it can sell this much amount of points (or carbon
credits) to a company in say, the US which has
been emitting carbons. The World Bank has built
itself a role in this market as a referee, broker and
macro-manager of international fund flows.
A central authority (in our case CDM India, an
authority under the Ministry of Environment and
Forests) sets a limit or cap on the amount of a
pollutant that can be emitted in a country.
Companies or other groups that emit the pollutant
are given credits (CERs – Certified Emission
Reductions) or allowances which represent the
right to emit a specific amount. The total amount
of credits cannot exceed the cap, limiting total
emissions to that level. Companies that pollute
beyond their allowances must buy credits from
those who pollute less than their allowances or
face heavy penalties. This transfer is referred to as
a trade. In effect, the buyer is being fined for
polluting, while the seller is being rewarded for
having reduced emissions. Thus companies that
can easily reduce emissions will do so and those
for which it is harder will buy credits which reduce
greenhouse gasses at the lowest possible cost to
society. Countries which have companies having

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higher credits will enable them to sell the credits in
the international market.

There are a number of international markets --

most notably the EU, with its European Union
Greenhouse Gas Emission Trading Scheme (EU
ETS) that began its operations on 1 January 2005.
Companies which accumulate CERs sell them there
in this market to interested buyers. The
international market for CERs has crossed the $30
bn mark in 2006, largely driven by the trading of
EUA (European Union Allowances). EUA are the
equivalent of CERs (Certified Emission Reductions).
China is the largest seller in the CDM market with
about 61% share, followed by India with 12%
share.
So far, India approved about 513 (as of April 2007)
projects with a potential to generate about 355 mn
CERs (Certified Emission Reductions). Each CER
can trade for anywhere between $6 and $16 in the
international marke

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Faults of Carbon Mechanism:

Several more recent studies have argued that even

the latest IPCC fi gures are an underestimate.

For example, James Hansen of NASA has pointed

out that the IPCC’s earlier calculation failed to take
account of ‘slow feedback’ mechanisms that
increase temperature rise caused by greater
greenhouse gas concentrations.14 More generally,
in their attempts to meet political demands that a
single unit be devised through which the climate
impact of one greenhouse gas can be compared
simply with another, and then bought and sold in
the form of pollution permits, scientists have
downplayed the unpredictable, complex and non-
linear impacts of climate change to render them
easier for policymakers and markets to digest.
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Statistics of Carbon Trading in the world:

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A wide range of Emission trading takes
place all over the world

Carbon Trading in India:

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 The Kyoto Protocol has created a mechanism
under which countries that have been emitting
more carbon and other gases (greenhouse gases
include ozone, carbon dioxide, methane, nitrous
oxide and even water vapor) have voluntarily
decided that they will bring down the level of
carbon they are emitting to the levels of early
1990s.Countries have decided on different norms
to bring down the level of emission fixed for their
companies and factories. A company has two ways
to reduce emissions. One, it can reduce the GHG
(greenhouse gases) by adopting new technology or
improving upon the existing technology to attain
the new norms for emission of gases. Or it can tie
up with developing nations and help them set up
new technology that is eco-friendly. Second by
buying carbon credits.

Carbon credits are a part of international emission

trading norms. They incentives companies or
countries that emit less carbon. The total annual
emissions are capped and the market allocates a
monetary value to any shortfall through trading.
Businesses can exchange, buy or sell carbon
credits in international markets at the prevailing
market price. Most of the beneficiaries of the
carbon trading are those companies that are
investing in windmills, Bio diesel, Biogas. Actually
by investing in such an alternative non-polluting
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source of energy, these companies will earn
carbon credit in the form of CERs (Certified
Emissions Reductions) to the tune they have not
polluted the environment.

Almost all industrialized countries are huge buyer

of carbon credit and all developing countries,
where industrialization has not reached its peak,
are supplier of carbon credit. India comes in latter
one. There is a great opportunity awaiting India in
carbon trading which is estimated to go up to $100
billion by 2010. In the new regime, the country
could emerge as one of the largest beneficiaries
accounting for 25 per cent of the total world
carbon trade, says a recent World Bank report. The
countries like US, Germany, Japan and China are
likely to be the biggest buyers of carbon credits
which are beneficial for India to a great extent.
India Inc pocketed Rs 1,500 crores in the year
2005 just by selling carbon credits to developed-
country clients. Various projects would create up to
306 million tradable CERs. Analysts claim if more
companies absorb clean technologies, total CERs
with India could touch 500 million.

Several Indian firms have taken advantage of the

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trading.

Whatever carbon trading may have achieved till

now, recent trends have shown that it is not going
to be effective in times of recession. With
companies cutting back on production and
squeezing costs, the demand for certified
emissions reductions (tradable carbon credits) has
slumped, resulting in carbon prices dropping from
more than 30 euros a tonne last year to about a
fourth of that level now. It has become more
economical to use fossil fuels than any alternative,
clean but costly, fuels as sources of energy.

Mumbai-based National Commodity and

Derivatives Exchange (Ncdex) started trading in
carbon credits in April 2008.An analysts, who
predict that in 2009, the carbon market will
contract for the first time since trading began
several years ago. In a recent report, industry
research group Point Carbon said that although
trading volume will likely grow 20% this year, the
total value of the carbon market will drop to $79.7
million – down 32% from last year.

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Where Does India Stand in Carbon
Trading?:

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With Indian economic growth based mainly on
energy from fossil fuels such as coal, there is
considerable potential for reducing greenhouse
gases and for CDM projects.
Of the 839 CDM projects registered with the United
Nations Framework Convention on Climate Change
(UNFCCC) as of November 2007, 288 projects are
in India, giving it a global share of 35 per cent
(Source: UNFCCC statistics).
Listed Indian companies are already reaping
sizeable profits through Certified Emission
Reduction (CER) deals. The UNFCCC issued 1.83
million CERs to SRF Ltd in February 2006 for its
HFC-23 thermal oxidation plant.
Following this there was a surge in its net profit in
the third quarter (December 2006) due to an inflow

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of Rs 122.28 crore from the sale of CERs. This was
nearly 27 per cent of the total income that year.
Tata Sponge Iron Ltd got a CDM certificate from
the UN for its waste heat recovery project in
Orissa. The company expects to reduce 3,17,624
tonnes of carbon dioxide over a 10-year period.
JSW Steel’s plant in Karnataka has got clearance
for its carbon credit project and is expected to earn
7.67 million CERs over the next 10 years.
All these CERs could be traded in the market,
which would provide potential income over the
next few years. Gujarat Fluorochemicals, Gujarat
Ambuja Cement, Birla Corporation Ltd, Balrampur
Chini Mills, Tata Steel and JK Cement are also
eyeing additional profits through the CER route by
2012. Reliance Energy already has energy
efficiency and process development CDM projects
and is now looking at natural gas-based power
plants.

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What’s for India in Carbon Trading? :
As world prepares to participate in the 2009
Copenhagen Climate Conference, many new ideas
will be considered to mitigate the present and
future threat of climate change. For a developing
country like India, an important point to keep in
mind is that of carbon trading or cap-and-trade and
what it entails. At present, the cap-and-trade
system is popular in EU.

Within the EU, far from being successful, the

European Union Emissions Trading Scheme (ETS)
has been a roller coaster of sorts. Starting in 2005,
the idea of reducing carbon dioxide emissions by
turning them into a commodity appeared to be an
instant hit. In 2005, 362 million tonnes of CO2
were traded on the European market for a sum of
7.2 billion euros. The scheme covered some
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12,000 industrial plants across the EU – including
power plants, oil refineries, and steel mills,
representing approximately 40 per cent of all EU
carbon emissions.

The inevitable collapse of the system came in the

spring of 2006, when the price for a tonne of CO2
emissions plummeted from 30 euros to fewer than
10 euros in a matter of weeks. By March 2007,
carbon credits had fallen to 1.20 euros, eventually
bottoming out to a low of ten cents a tonne in
September. With emissions credits virtually
worthless, companies had no financial incentive to
reduce carbon or invest in cleaner technologies.

One possibility at Copenhagen will be whether

countries ought to impose a lower limit – a “floor
price” – possibly up to 40 euros per tonne, to keep
the cost of carbon high. Governments will also
want to talk about so-called “carbon leakage”,
where heavy emitters in one nation with a trading
system simply move abroad to having to buy
permits and higher energy bills.

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With more countries preparing for cap-and-trade
schemes over the next decade, worries about
global competitiveness ought to diminish. But the
practical problem of international standards in
auditing emissions remains.

Thus, India should press forward for a neutral

emissions auditing agency, which could be formed
using existing infrastructure of United Nations.
Also, if world fails to impose a carbon floor due to
the economic slowdown, we will need other means
of increasing the price of carbon, such as national
policies of taxation which will nudge citizens in the
right direction. In some respects, taxes are more
effective than carbon trading because they are
more easily controlled and the state can institute
them. Again, when taxes are imposed, a neutral
agency's oversight is recommended for proper
enforcement in world economies.

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Carbon Trading: Solution or Obstacle? :
The growing recognition that carbons markets are
not helping alleviate the climate crisis is an
encouraging step toward a more constructive
approach. However it is helping in the reducing
the emergence of the green house gases. Like
every coin has its two sides, even Carbon Trading
the both its positive and negative factors.

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Advantages of Carbon Trading:

As a result of increased concern over global

warming because of greater carbon emissions in
the air, governments and other organizations have
been searching for effective solutions to the issue
of pollution. Among many other strategies for
dealing with this issue, carbon trading and carbon
offset have been highly successful.

Carbon trading involves organizations buying

carbon credits from the market. The credits restrict
the level of greenhouse gases that companies can
discharge in to the air without being penalized for
it.

The basic benefit of the carbon trading method is

that it rewards lowering of emissions. The idea is
that companies will realize that adopting greener
methods of carrying out business is more
profitable than facing penalty for carbon credits. If
a company is made to pay for polluting the air then
it will try to adopt methods that are less polluting if
it desires to stay competitive. With the number of
businesses that adhere to this system rising, the
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quantity of overall emissions by countries will
reduce, thereby making the environment cleaner.

One more benefit of the carbon trading system is

its free market model that allows any organization
to buy carbon credits or offer them for sale. As a
result of non intrusion from the local
administrations such as levying of fines or creating
regional legislations, this method is quite
successful.

Disadvantages of Carbon Trading:

The greatest problem however with carbon trading

is that a global framework for trading is yet to be
formulated. As most of the trading happens in the
international markets, it is tough for some regional
businesses to follow this system.

Some businesses are unwilling to adopt this

system, as they do not want to incur costs that
cannot be passed on to their customers. Further,
numerous small organizations are not capable of
affording the expenditure on buying the
technology or implementing state-of-the-art
techniques that would lower their emissions.
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 Therefore, they are caught in a position that
makes them bear the costs of carbon credits
continuously and thus they fall behind in the race
against larger organizations.

Climatic Changes due Carbon Trading:

A case on the changing climate due to Carbon

Trading :

NIASSA PROVINCE, Mozambique, Nov 5, 2009

(IPS) - A visit from Dutch contractors to
Niassa Province, in northwestern
Mozambique has got communities excited
about the prospect of a carbon credit scheme
35
in the area.

Gathered under a large mango tree in a lakeside

village, a community is deep in discussion. We
have many problems here, says an elder. We have
no health centre, says another. There is a lack of
employment.

Everyone has their say: Water is a problem. The

wood and fish supplies are shrinking. Transport is
very difficult. Animals, insects and disease
destroying our crops… the list goes on.

The village is one of many spread across the

undeveloped shoreline of Lake Niassa. Each
community speaks of the same problems; some
more, some less, each wanting development, each
wanting change.

So when representatives of Silvestrum, a Dutch

company working on sustainable management and
carbon assets in the agriculture, forestry and land-
use sector (AFOLU), came to Niassa Province in
September to study the viability of a carbon credit
scheme in the area, villagers' ears pricked up.

Silvestrum has been involved as an advisor on

forest management and carbon certification in a
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variety of projects in Asia, Latin America and
Africa, including biofuel projects in Malawi and
Tanzania and developing community-based
systems for measuring and monitoring forests for
carbon trading in Papua New Guinea.

Details of the project proposed for Niassa are not

yet defined, but Silvestrum director Eveline Trines
told IPS it would likely include a combination of
improved agriculture, forest management and
firewood plantations.
A successful scheme could bring additional income
into one of the poorest areas of Mozambique,
prompt development, and help protect the local
environment from current deforestation and
burning, and future mining developments planned
in the area.

The United Nations Framework Convention on

Climate Change (UNFCCC) regulates and supports
the Clean Development Mechanism, which allows
polluters in developed countries to invest in
projects that reduce emissions in developing
countries rather than reducing emissions in their
own countries.

The UNFCCC claims that 4,200 CDM projects have

been approved to date; over 300 million carbon
credits - each equivalent to a tonne of CO2 - are
37
issued annually. The UNFCCC expects that by
2012, 8,000 CDM projects could be running,
generating more than $30 billion for developing
countries.

There is a separate voluntary market for carbon

offsetting, in which individuals and companies
invest in projects to offset their emissions.

According to the environmental group Friends of

the Earth UK (FoE UK), by 2007 the voluntary
offsetting market accounted for 65 million tonnes
of CO2 and CDM accounted for 791 million tonnes.

But offset schemes have been criticised by NGOs,

environmentalists and individuals, who see it as
distracting from a larger picture of over-
consumption, pollution and climate change. FoE UK
published a sharply critical report on carbon
offsetting in June, titled "A Dangerous Distraction;
Why Offsetting is Failing the Climate and People:
The Evidence" arguing that offsetting does not
guarantee emission reductions and may do more
harm than good.

However, the Umoji Association, a representative

voice for conservation, resources and development
issues for 300,000 hectares of the northwest
Niassa Province, is enthusiastic about the benefits
38
an offsetting scheme could bring, and are waiting
willingly for the next step.

"We are very poor in these communities," said

Dinis Joal Manda, a member of the Umoji
Association in Cobue. "We have nothing. The
community want (development), they want
hospitals, clinics, schools, roads and these
things…"

With burning and deforestation taking place at an

alarming rate in the area, Manda recognised the
need for conservation. "There is also no guard in
the area, so everyone is burning and chopping
down trees, we want to stop that," he said.

Although he wasn't sure as to how carbon

offsetting works or exactly how much money the
scheme could bring, Manda was eager to start.

"Umoji has nothing now, we need someone to help

us, so we think the money we will receive for the
carbon project will help us in making these
(conservation) projects," he said.

From the perspective of reducing carbon emissions

overall, Friends of the Earth is sceptical, believing
carbon trading does not actually encourage
polluters to switch to cleaner technologies, thus
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delaying the overall reductions in emissions
needed to avert catastrophic climate change. In
the worst cases, offsetting projects may even do
considerable harm to local economies.

The report gives the example of a CDM project in

India where a hydro plant on the Bhilangana river
is threatening to destroy a low-carbon system of
agriculture when it displaces local farmers run a
successful terraced irrigation system to produce
rise, wheat, mustard, fruit and vegetables.

"We don't agree with offsetting outside Northern

nations at this point because there are many well-
documented instances of offset programs
negatively impacting on people and communities
in the South," said Cam Walker, the campaigns
coordinator for FoE Australia.

"We believe emissions reductions should be made

at domestic level only," said Walker. "However, we
do trust community organisations, and if they
believe they can work a good deal for themselves
and their community on a specific carbon credit
programme, then we would support their choice in
getting involved in that."

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The FoE UK report says that developing nations will
need at least $200 billion a year for mitigation, and
$67 billion a year for adaptation by 2020.
Developing countries simply do not have the
capacity to address poverty and human
development while simultaneously adapting to and
mitigating climate change, it said.

Silvestrum director Trines says that carbon trading

allows polluters in developed countries to adopt
cleaner technologies at their own pace while
contributing to sustainable development in
developing countries.

Is carbon trading the appropriate mechanism to

fund all or part of this need? The answers to that
question are part of what is at stake both at the
level of global climate change negotiations to be
held in Copenhagen in December, and in working
out the fine details of thousands of projects in
places like Niassa. (END)

41
Carbon trading fraud:

Indian policy-makers are loath to accept

greenhouse emission cuts but promote
market-driven non-solutions to global
warming such as carbon trading.
TWO sets of images published in Indian
newspapers in December should make us all sit up.
The first depicts projections made by scientists at
the U.S. National Centre of Atmospheric Research
in Boulder, Colorado, of a likely further decline in
the ice cover of the Arctic Ocean caused by global
warming. This will turn the ocean mostly into open
water as early as 2040 - with devastating effects
on the earth's climate, plant and animal life, and
human affairs.
The second set consists of two photographs of the
Pindari Glacier in the Kumaon Hills, one taken in
October 1936 by forester and legendary wildlife
photographer F.W. Champion and the other taken
70 years later by his grandson. These show a
42
frightening receding of glacial ice, and just a trickle
in place of a rich perennial flow, amidst denuded
mountains.
This graphically confirms what other studies have
shown: major Himalayan glaciers are melting at an
alarming rate, spelling calamity for many Asian
countries, including India and China. Seven of
Asia's greatest rivers originate in the Himalayas,
including the Ganga, the Brahmaputra, the Mekong
and the Yangtse. Rapid melting of Himalayan ice-
caps will create floods and droughts and menace
Asian agriculture - and hundreds of millions of
livelihoods - in ways inconceivable earlier.

Clearly, global warming is not some distant

phenomenon. It is already upon us in tangible
ways. This realisation should shake us out of our
complacency and trigger serious corrective action.
And yet, Indian policy-makers have doggedly
refused mitigation measures such as radical
energy conservation, curbing runaway growth of
private transport, mandatory shifts to renewable
energy, and deep cuts in greenhouse gas (GHG)
emissions.

43
Right since the 1992 United Nations Conference on
Environment and Development at Rio de Janeiro
and through the 1997 Kyoto Protocol, India has
refused any binding cuts in its emissions on the
grounds that global warming is largely caused by
fossil fuel burning in industrialised countries and
although India's GHG emissions are rapidly rising it
is a "developing" country whose per capita
emissions are still only a fraction of those of the
North.
This refusal was in evidence at the U.N.-sponsored
Nairobi climate conference in November. It was
also highlighted more recently during a visit to
New Delhi by former World Bank chief economist
Nicholas Stern, the author of a 700-page report on
climate change commissioned by the British
government, which warns of a "natural calamity on
the scale of world wars and the Great Depression".
On December 4, Stern presented a summary of his
report to the Planning Commission. Although the
Commission had no consensual position on the
issue based on its own deliberations, it responded
by presenting two papers by economists Jyoti
Parikh and Chandra Kiran B. Krishnamurthy. These
essentially argue that India should not agree to
binding emission cuts because these will adversely
affect gross domestic product (GDP) growth.

44
Apart from the fact that it is based on a
questionable model - which unconvincingly
assumes greatly improved energy efficiencies, but
cannot be discussed here for lack of space - the
basic trouble with this argument is that it is
desperately parochial and can be made by anyone.
Indeed, President George Bush Senior advanced
that very reasoning when he declared at Rio that
he was not there to trade "American lifestyles".
However, halting and reversing global warming is
such a universal imperative that all major GHG
emitters must drastically reduce their emissions.
India, like China and Brazil, is already among the
world's top 10 polluters. Its GHG emissions have
been rising more rapidly than the world average.
Between 1992 and 2002, global emissions
increased by 15 per cent. But India's emissions
grew by 57 per cent, even faster than China's 33
per cent. India's carbon dioxide emissions are
projected to increase almost two-and-a-half times
by 2030. Carbon dioxide emissions from vehicles
alone could rise 5.8 times for India compared with
3.4 times for China.
Besides, the Indian economy is remarkably carbon-
inefficient, India ranking 85th among a total of 141
nations. India is far more inefficient than other
developing countries such as Bangladesh, Brazil,
45
the Philippines and Indonesia; indeed, it compares
poorly even with industrialised countries such as
Germany, Britain, the Netherlands, France, Italy,
Spain, Japan, Denmark and Sweden.

It simply will not do to contend that India's per

capita emissions are about one-fourth the global
average and so it is not obliged to cut GHGs. The
per capita average hides enormous differences in
consumption between India's rich and poor. It is
the unbridled luxury consumption of its affluent
classes that is driving the giddy rise in India's GHG
emissions. The majority of Indians remain as frugal
as ever in their use of resources.
This makes it imperative that India move towards
accepting deep cuts in emissions, in particular
those relating to private vehicles, the profligate
use of energy and water by the rich, and the
skyrocketing consumption of air-conditioners,
washing machines, microwave ovens and plasma
and liquid crystal display (LCD) television sets.
However, there is one part of the Stern report, its
weakest, that Indian policy-makers wholeheartedly
agree with. And that has to do with carbon trading
46
as the principal instrument for mitigating global
warming. This is a booming business. Last year,
Indian companies made a neat Rs.1,500 crores by
selling certified reduction emissions (CERs, each
equivalent to one tonne of carbon dioxide). By
2012, India's earnings are estimated to jump to
Rs.18,000 crores.
India accounts for the highest proportion of
projects (29.2 per cent) of the global total (459)
registered with the Clean Development Mechanism
(CDM) Executive Board, far higher than Brazil's
18.3, Mexico's 15.7, and China's 7.6 per cent. (In
annual CERs, however, India's share is 11.5 per
cent, compared with China's 43.2 per cent). The
single largest Indian deal, for Rs.1,000 crores, was
bagged by Gujarat Fluorochemicals, which runs a
refrigerant plant but is better known for its "Inox"
multiplexes. No wonder much bigger companies
like Reliance, Grasim Industries, Gujarat Ambuja
and Tata Chemicals are considering investing in
carbon trading.
Carbon trading is encouraged under the CDM
established by the Kyoto Protocol, which permits
corporations and governments of the North not to
undertake mandatory emission cuts in their
activities and instead to buy CERs from the South,
earned through projects that are supposed to
achieve equivalent reductions. In the past year
47
alone, the European Union carbon trading market
doubled its turnover to euro 22 billion.
Carbon trading has drawn serious criticism from
environmentalists, who argue that it essentially
allows the North to evade its duty to reduce
emissions, while supporting questionable projects
in the South, which may not lead to any emission
reductions.
According to a World Bank estimate, just 10 per
cent of CDM projects involve renewable energy,
improved energy efficiency or a fuel switch. Many
promote monoculture plantations.
Nearly 60 per cent of projects aim at destroying
trifluoromethane (HFC-23), a potent GHG, in
incinerators, which cost, according to one
estimate, just $31 million to build and run for a
year but generate an absurdly high $800 million
worth of CERs. Some others put a premium on
waste incineration over renewable energy such as
wind or solar energy.
According to the Dutch National Institute for Public
Health and the Environment, emissions trading will
achieve only a 0.1 per cent reduction in
greenhouse emissions, a mere fraction of the 5.2
per cent Kyoto target, itself totally inadequate.

48
Now a definitive and radical critique of carbon
trading has emerged in a special, extensively
documented issue of Development Dialogue,
published by Sweden's Dag Hammarskjold
Foundation (available at www.dhf.uu.se) . Authored
by Larry Lohmann, Carbon Trading: A Critical
Conversation on Climate Change, Privatisation and
Power argues that the neoliberal economic
paradigm on which carbon trading is based is
fatally flawed and rewards polluters by bestowing
tradable property rights on them in an arbitrary,
unequal fashion. Thus, only Northern agencies are
given "quotas", some far in excess of the
appropriate share. The allotment of pollution
"offsets" to the South is arbitrary too. Just four
countries (India, China, Brazil and South Korea)
claim four-fifths of global credits.
Pollution rights promote rent-seeking rather than
purposive action to reduce emissions through
material or energy saving and reducing fossil fuel
dependence. Worse, they inhibit serious innovation
and structural change while rewarding superficial,
paltry "end-of-pipe" solutions. There are inherent
difficulties and uncertainties in quantifying and
measuring either global emissions or carbon
49
offsets. This makes for arbitrary and skewed
bargains, in which consultants play god. Lohmann
concludes on the basis of nine case studies,
including one from India, that most offset projects
in the South are typically predatory upon local
communities and create conflicts through the
exploitation of resources and licensing of polluting
activities. Carbon trading represents a serious
diversion from the urgent task of reducing fossil
fuel consumption by cutting subsidies; establishing
systems of regulation, green taxation and legal
action; providing public services; and promoting
renewable energy the world over. Rather, it will
prolong the globe's dependence on fossil fuel. It is
both ineffectual and unjust. The sooner India
accepts this and moves towards genuinely
reducing GHG emissions, the better.

Bibliography

 www.wikipedia.com

 www.google.com
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 www.askjeeves.com

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