Financial Daily from THE HINDU group of publications
Tuesday, Jun 06, 2006
Carbon credits: Silver lining to global warming
Pankaj Narayan Pandit
Rapid increases in the concentration of greenhouse gases in Earth's atmosphere have been caused by rising industrial activity, fossil fuel combustion and deforestation. Global warming, a serious crisis threatening the planet, is causing fundamental changes to Earth's climate system.
In the last few years, the world has witnessed frequent catastrophes, such as severe drought, heavy rain 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 property due to higher sea levels and storm surges.
REDUCING GREENHOUSE GASES
The Kyoto Protocol recognised that the greater the concentration of greenhouse gases (GHGs) in the atmosphere, greater the climate change. Carbon-dioxide, the most common of GHGs, emitted during the burning of fossil fuels, is identified as the single most important factor contributing to global warming.
Advantage to developing countries: Many countries have ratified the Kyoto Protocol that commits them to reduce their emission of GHGs, mainly carbon-dioxide and methane, to pre-1990 levels. The developing countries have made no commitment to reduce their GHG emissions. Nor have the countries of industrialised European Union and Japan been able to reduce their emission levels. Such countries have devolved a large part of this obligation to the companies that emit GHGs.
When countries or companies are unable to reduce emissions on their own, the Kyoto Protocol allows them to purchase carbon credits from projects in developing countries that reduce carbon emissions. Carbon credits are saving of one tonne of carbon emitted.
Polluter pays: Emissions trading introduces scarcity by establishing limits on overall emissions. Companies wishing to cut emissions can comply by purchasing tradable emission rights from those making extra cuts. The market of carbon emission allowances helps assure efficient use of the environment, and its protection, to an extent.
The carbon-trading price is the financial reward for those who reduce emissions, an allowance to emit one tonne of carbon-dioxide. The price at which carbon is traded is around $10 per tonne. This price depends on such factors as the rate of economic growth, the relative cost difference between coal and gas, and even weather conditions.
Private sector initiates trading: Only those projects getting overseas assistance are allowed to trade credits. The government has to first approve the project before the project is validated, and a developed country should be ready to buy the credit.
Over 15 million tonnes of carbon were traded in 2005. The Chicago Climate Exchange (CCX) offers a platform for carbon trading for the private sector.
What projects qualify
A long-held belief among the environmentalists is "What is good for ecology is good for economy too". Now, with the availability of carbon credits subsidy, this is truer than ever.
Land-fill projects: All municipal corporations in India use landfill technique to get rid of household waste. The household waste is simply dumped in landfills located on city outskirts. Due to anaerobic composting of waste, such landfills generate considerable methane gas, igniting fires and generating undesirable smoke. The Supreme Court has issued a directive to the municipalities to take action to avoid such pollution.
Now, with carbon credits, it will be feasible for municipal bodies to subsidise projects that generate electric power from the methane gas emanating from landfills. By separating the household waste, man-made materials such as paper, plastic, glass, metals, etc., can be recycled, and the organic part of the garbage composted using aerobic composting techniques, preventing methane gene- ration, and claiming carbon credits.
Sewage treatment plants: Very few of India's municipalities treat sewage, thus polluting downstream rivers or seas. All such untreated sewage increases the carbon content in water bodies, generating undesirable growth of water hyacinth and algae, and killing other beneficial aquatic life. If the local bodies treat sewage water and recover methane to generate power, such projects can claim carbon credits. Large housing colonies, college hostels, etc., can run back-up power generation plants from the abundant methane gas available in sewage.
Social forestry schemes: Plants absorb carbon and, hence, social forestry schemes qualify for carbon credits. However, we need to avoid monoculture plantations that may not help maintain the ecological balance.
Cogeneration projects: Industry can implement waste heat recovery and co-generation projects that reduce emissions and save power and, hence, qualify for carbon credits.
Hydro/wind power plants: Coal-based power plants release three times more carbon than hydel or wind-powered systems. Hydroelectric, wind power plants, and solar heating systems can thus qualify for subsidy of carbon credits.
Solar heating projects: Solar heating avoids burning of fossil fuels and is, hence, a good candidate for carbon credits. Can India build community kitchens for the masses using solar energy? For instance, schools offering mid-day meals or temples, mosques, and gurdwaras feeding devotees. All they need to do is to adopt solar heating to claim carbon credits.
The Earth family
Projects that are for greater benefit of community qualify as gold standard projects which, apart from reducing carbon-dioxide emissions, also result in community development, poverty alleviation and employment generation, ensuring quick financing. The Kyoto Protocol gives Asian countries a unique chance to replace old technologies with sustainable ones.
The two most populous countries, India and China are globalising, their rural economies are fast transforming into urban agglomerations. A blind adoption of existing Western technologies by a two billion plus population will greatly endanger the world's fragile ecological balance.
Adoption of clean technologies and reinventing indigenous ways of life are key to the sustainable growth and progress of humanity in the 21st Century. Vasudaiva Kutumbakam, the whole of Planet Earth is one family, says an ancient Indian text. The Kyoto Protocol can accelerate the assimilation and spread such a philosophy.
(The author is managing trustee and founder of SLK Foundation, a registered charitable trust. His e-mail address is firstname.lastname@example.org)
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