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Climate Changes
Mechanism & Its Types
Green House Gases
Global Warming Potential
Issues & Drawbacks
Carbon Sequestration
Market Overview
Carbon Credit & Pakistan
“A carbon credit is a generic term for any
tradable certificate or permit representing
the right to emit one tone of carbon dioxide
or the mass of another greenhouse gas with a
carbon dioxide equivalent (CO2) to one tone
of carbon dioxide.”
 Carbon credits and carbon markets are a
component of national and international
attempts to mitigate the growth in
concentrations of greenhouse gases.
 If a cement manufacturer reduces its CO2 emissions by
one ton by adapting some changes into its process or by
any other means; say just by planting some trees around
its plant, it is awarded “one carbon credit”. This carbon
credit can be sold to any industry, allowing it to emit one
extra ton of CO2 than its allowable limit.
 Nike has sold emission reduction credits equaling
100,000 tons to the utility company Entergy. Entergy has
also purchased carbon credits from DuPont and Shell.
 Other companies dealing in carbon credits include
Expedia, Whole Foods, and Haynes International, Inc,
 According to the World Bank Economist Mr. Stern,
the effect of climate change could be worse than the
two World Wars.
 Currently there are six exchanges trading in carbon
– Chicago Climate Exchange
– European Climate Exchange
– NASDAQ OMX Commodities Europe
– Power Next
– Commodity Exchange Bratislava
– European Energy Exchange
 The mechanisms assists the parties meet their
emission reduction targets.
 These mechanisms are:
– Joint Implementation (JI)
– Clean Development Mechanism (CDM)
– Emission trading (ET).
Clean development mechanism (CDM):
 Under CDM, an annex 1 country takes a green house
gas reduction project activity in a non-annex 1
 The developed country gets credits for meeting its
emission reduction targets, while the developing
country receives the capital and clean technology to
implement the project.
The parties involved:
 Must participate voluntarily;
 Must establish national CDM authority;
 Must have ratified the Kyoto Protocol;
 To combat these changes globally, Kyoto
Protocol was ratified by 170 countries.
 The Kyoto Protocol envisages reduction of
Green House Gases by 5.2% in the period
 Green house gases (GHGs) are gases that result in global
6 GHGs are regulated under the Kyoto Protocol
 – Carbon dioxide (CO2)
 – Methane (CH4)
 – Nitrous oxide (N2O)
 – Hydrofluorcarbons (HFCs)
 – Perfluorcarbons (PFCs)
 – Sulphur Hexafluoride (SF6)
 There are at least 25 other gases, including
chloroform, CO and water vapor that influence
climate change
 Above mentioned six are the key ones, that can be
controlled by human intervention with relative ease.
What does a ton of GHG look like?
Global Warming Potential (GWP):
Global warming potential (GWP) for the 6 GHGs are
summarized below
•GWP is the global warming impact that a GHG would have over a 10-year timeframe
•By definition, CO2 is used as the reference benchmark.
Issues & Drawbacks:
 World’s largest GHG emitter, has not ratified the
Protocol Australia?
 Short horizon: First phase of the Protocol covers up
to 2012– Extension?
 Country reduction targets defined, but division of
that by industry and sector within countries not yet
Carbon Sequestration:
 Carbon sequestration can be defined as the capture
and secure storage of carbon
 Carbon credits encompass two ideas:
1. Prevention/reduction of carbon emissions produced
by human activities from reaching the atmosphere by
capturing and diverting them to secure storage
2. Removal of carbon from the atmosphere by various
means and securely storing it.
Carbon Credit & Pakistan:
 Vast potential for carbon credit.
 Member of Kyoto Protocol, Pakistan is eligible to benefit from
the projects under Clean Development Mechanism (CDM) and
exploring carbon credit potential in different industries.
 The ministry has identified tremendous potential of CDM in
sugar industry.
 “Carbon Credit Opportunities in the Power Sector
of Pakistan”
 “Carbon Trading Workshop”,
Pak Arab Fertilizers:
 High Profit of Pak Arab Fertilizers was contributed by the
“Clean Development Mechanism (CDM)” project, which
was achieved through sale of carbon credits in the
international markets.
 By means of the CDM project–the first and only such
project in the country-the company has not only
increased its income but also earned valuable foreign
exchange for the country.
 The company has managed to sell carbon credits in
Japan and the European Union.