Sunil K Kumbhat (not verified) — Fri, 05/29/2009 - 11:06am

GLOBAL WARMING AND CARBON CREDIT

BY Sunil K Kumbhat

On Earth CO2 and other greenhouse gases (GHGs) helped stabilize temperature to a level that is suitable for organic life. This is known as the GREENHOUSE EFFECT.

This takes place when heat energy from the sun passes unimpeded through the atmosphere and warms up the Earth. In turn, the Earth radiates this energy back towards space.

Environmentalists and energy economists have long been voicing concern on the rise in the level of Greenhouse Gases (GHG) , which leads to Global Warming and Climatic Changes that are detrimental to economies worldwide.

Greenhouse Gases prevent solar energy from escaping into the atmosphere. This traps heat, and causes “GLOBAL WARMING” accompanied by a rise in sea –level and changes in weather patterns, increase in global mean rates of precipitation and evaporation, which will have grave impact on agriculture and water resources.

In the last few years , the world has witnessed frequent catastrophes , such as severe drought , heavy rains cycles , cloudbursts , longer and more extreme heat waves , spread of tropical diseases such as SARS and BIRD FLU , damage to vegetation and agricultural systems due to pests , and threats to coastlines and proper due to higher sea levels and strom surges.

The greenhouse gases – water vapour (the main greenhouse gas), methane, ozone, carbon monoxide, nitrous oxide and CO2 – absorb some of this energy and emit it in all directions, including back towards the earth. As a result Earth’s temperature is about 34 degree Celsius warmer.

Through a system of sources and sinks earth has managed to regulate concentrations of greenhouse gases. In the form of CO2 and methane, carbon is emitted by volcanoes and by rotting vegetation and other organic matter. But CO2 is sequestered, or absorbed, by trees, soil, water bodies.

Through various conservation practices, CO2 can be captured and stored in soil and vegetation. This process is termed as ‘CARBON SEQESTRATION’. Such conservation practice includes:

(1) CO2 can be diverted to secure storage in plant material, more plants equal more carbon stored

(2) Decrease organic carbon mineralization – which is managing crops and soil to restrict conditions that accelerate the oxidation of soil organic matter & leading to release of CO2

(3) Since eroded soil is exposed soil & exposed carbon, reduction of soil erosion will keep carbon trapped in the soil.

Great amount of research has been done which revealed the benefits of organic matter or soil carbon in improving the soil quality & sustainability of balanced agricultural productivity.

Indeed, scientists have become aware that increased concentrations of CO2 actually stimulate the growth of many different types of plant, including trees – this is called the CO2 FERTILIZATION EFFECT.

Although some of the CO2 will be released back into the atmosphere through increased respiration, more carbon should be sequestered. If series of volcanic eruptions or burning of fossil fuels emitted excess CO2, into the atmosphere, in time it would be partly absorbed by increased growth of forests, and partly dissolved in the oceans.

Over the last century, burning of fossil fuels like coal, oil and natural gas – in which carbon has been stored for millions of years – along with accelerated land clearance has led to unprecedented levels of greenhouse gas emissions. Nearly 60-70% of GHG emission is through use of fuels in industries such as steel, cement, fertilizers and textiles.

Some GHG such as hydro fluorocarbons, methane, and nitrous oxide are released as bye product of certain industrial process, which adversely affect the ozone layer, leading to GLOBAL WARMING which is a serious crisis threatening the planet , is causing fundamental changes to earth’s climate system.

Today Global warming is the Watchword and reducing carbon dioxide emission is the Buzzword.

Carbon sinks are not sufficient, and concentrations of greenhouse gases in the atmosphere have risen dramatically. This will lead to general and very rapid warming of the world’s climate.

It is predicted that it will result in widespread ecological changes in agricultural production, and rising sea levels. This calls for greater attention and precautionary measures to be put in place.

People have become increasingly concerned about the possible effects of global warming. Although the annual rate of emissions has been decreasing, the CO2 concentration in the atmosphere is still increasing.

In 1992, most developed countries in the world agreed to the United Nations Framework Convention on Climate Change (UNFCCC), which is designed to impose limits on greenhouse gas emissions and thus minimize the adverse effects of climate change.

Scientists predict that we need to decrease global CO2 emissions by at least 50 per cent of current levels by 2050 to stabilize global carbon dioxide levels and prevent further climate change. But decreasing the use of fossil fuels is a slow process.

Looking for other alternatives such as growing more trees or not cutting more trees, which we would otherwise be, will solve only part of the problem. Therefore negotiations conducted by all the countries that have signed the UNFCCC have paved the way for this possibility.

CONCEPT OF CARBON CREDIT

While finding solution to the problem, the concept of ‘carbon credit’ came into vogue as part of an international agreement, popularly known as the Kyoto Protocol.

Carbon credits basically seek to encourage countries to reduce their greenhouse gas emissions, as it rewards those countries the meet their targets and provides financial incentives / gains to others to do so as quickly as possible.

In simple terms, carbon credits are certificates issued to the countries that reduce their GHG emissions, which otherwise cause the depletion of the atmosphere’s ozone layer, leading to global warming. Surplus credits (collected by overshooting the emission reduction targets) can be sold in the market.

The Greenhouse gas reductions are measured in tones of carbon dioxide-equivalent.

Carbon credits are measured in units of certified emission reductions (CERs), equivalent to one tonne of CO2 reduction.

One carbon credit is 1 ton of CO2 equivalent.

Carbon credits are certificates issued to countries that reduce their emission of greenhouse gases (GHG) , which otherwise cause the depletion of the atmosphere’s ozone layer , leading to global warming.

Developed countries that have exceeded the prescribed CO2 levels can either cut down emissions, or borrow or buy carbon credits from developing countries as it is considered that the major responsibility of curbing emission rests with the developed countries, which have accumulated emissions over a long period of time.

Carbon transactions are defined as purchase contracts or ERPAs (Emission Reductions Purchase Agreements) whereby one party pays another party in return for GHG emissions reductions, that the buyer can use to meet its compliance – or corporate citizenship – objectives vis-à-vis greenhouse gas mitigation.

The Kyoto Protocol is an Historic Milestone.

Countries under this protocol commit to reduce their emissions of carbon dioxide and five other greenhouse gases, or engage in emissions trading if they maintain or increase emissions of these gases.

Kyoto protocol is an international treaty between more than 160 countries globally (not including the United States and Australia) including European union, Japan, Canada for reducing GHG emission by 5.2% below 1991 levels by 2012 and over 55% of global greenhouse gas (GHG) emissions. Of these, 35 countries and the EEC are required to reduce greenhouse gas emissions below levels specified for each of them in the treaty.

The individual targets are listed in the Kyoto Protocol’s documents. These add up to a total cut in greenhouse-gas emissions of at least 5% from 1990 levels in the commitment period 2008-2012.

The Protocol, in force as of 16 February 2005 following its ratification in late 2004 by Russia, provides the means to monetise the environmental benefits of reducing GHGs.

It is designed to cut greenhouse gas emissions by making the polluter start paying for climate change. The pollutants in question are carbon dioxide (CO2), methane, nitrous oxide from vehicle exhausts, and some types of man-made gas used in industry.

The polluters are the countries, which emit them into the atmosphere.
Under this Governments / Countries are separated into two general categories: -

(1) Developed countries, (who have accepted GHG emission reduction obligations); and

(2) Developing countries, (who have no GHG emission reduction obligations).

Any country struggling to fulfill its obligations may have to buy credits from another that is on track to meet its target.

The USA which is the largest emitter of GHG’s and accounts for more than on-third of the total GHG emissions in the world, has not ratified the Kyoto protocol.

With such a major trading ally out of the ambit of the protocol there is a question mark on the successful implementation of the same.

( If USA agrees to ratify the Kyoto Protocol , the Carbon Trading may simply EXPLODE )

EMISSIONS TRADING
The Kyoto Protocol set binding target for reducing GHG emissions.
Emissions trading, as set out in Article 17 of the Kyoto Protocol, provides for concerned Parties / countries to acquire units from other concerned Parties / countries and use them towards meeting their emissions targets under the Kyoto Protocol.
This enables Parties to make use of lower cost opportunities to reduce emissions, irrespective of the Party in which Party those opportunities exist, in order to lower the overall cost of reducing emissions.
Only concerned Parties / countries to the Kyoto Protocol with emission limitation and reduction commitments inscribed in the Protocol may participate in such trading. Such Parties may therefore be prepared to transfer units when they do not require them for compliance with their own emission targets.
The units which may be transferred under Article 17 emissions trading, each equal to one metric tonne of emissions (in CO2-equivalent terms), may be in the form of an assigned amount unit (AAU), a removal unit (RMU), an emission reduction unit (ERU), a certified emission reduction (CER).
Transfers and acquisitions of these units are to be tracked and recorded through the registry system under the Kyoto Protocol. Parties may also authorize legal entities (e.g. businesses, non-governmental organizations and other entities) to participate, under their responsibility, in Article 17 emissions trading. Accounts may be created in national registries to provide for such participation by legal entities.

Trading in Carbon Credits

Trading in Carbon credits rewards countries which meet their target and provide financial assistance to others to do so as soon as possible. Surplus credits can be sold in the market. One credit is equivalent to one tonne of CO2 emissions reduced.

Foreign countries that cannot fulfill the protocol norms can buy the surplus credits from companies in other countries through trading.

Through this carbon trading system, big polluters in developed countries can pay companies in developing nations to cut emissions in their stead.

Since many factories in developing countries use dirty, inefficient processes, it's often cheaper to clean them up than to replace the more modern equipment used in wealthy nations.

The catch however is the cost; developed countries have to spend nearly $300-500 for every tonne reduction in CO2, as against $10-25 to be spent by developing countries. The stage is thus set for trade to flourish. Trading carbon credits is hence seen as a less expensive option.

Clean Development Mechanism (CDM) has been put in place to facilitate the trade of carbon credits between the developing and developed nations by United Nations Framework Convention on Climate Change. Till date CDM held little significance, as there was no accrediting body recognized by the United Nations. Not any more.

Monetary gain is, of course, first and foremost thing, which attract such trade. Every tonne of CO{-2} not emitted is considered as one credit and every carbon credit fetches the company handsome money. The remuneration continues year after year.

The carbon market grew in value to an estimated US$21.5 billion in the first three quarters of the year, more than doubling in value over the previous year The market was dominated by the European Union Emissions Trading Scheme (EU ETS), which shrugged off signs of weakness following the sharp declines that accompanied the release of verified emissions data in May 2006.
The Chicago Climate Exchange (CCX), the New South Wales Greenhouse Gas Abatement Scheme (NSW) and the United Kingdom Emissions Trading Scheme (UK ETS) all grew sharply, as did the trendy but non-standardized retail carbon market.