ICTSL seeks carbon credits from WB
INDORE CITY Transport Services Limited (ICTSL) is completing formalities to seek benfits under carbon finance scheme from World Bank in its attempt to reduce emission of carbon di-oxide in the City by making citizens opt for City buses and leave their vehicles at home.Updated: Jan 02, 2007 16:36 IST
INDORE CITY Transport Services Limited (ICTSL) is completing formalities to seek benfits under carbon finance scheme from World Bank in its attempt to reduce emission of carbon di-oxide in the City by making citizens opt for City buses and leave their vehicles at home.
City buses, ICTSL Executive Director and District Collector Vivek Aggarwal said, had reduced air pollution (CO2 emission from private vehicles) as about 60,000 passengers commute via them daily. “This way we have made attempts to reduce pollution and clean the City’s environment. We are sending a poject note to WB to seek carbon credits.
We are in the process of calculating the reduction in CO2 emission and the credit that could be availed,” Aggarwal told Hindustan Times.
India is a signatory of Kyoto Protocol where countries have resolved to reduce greenhouse gas emissions under Clean Development Mechanism (CDM) and reduce global warming.
Carbon transactions are purchase contracts whereby one party pays another in exchange for a given quantity of greenhouse gas (GHG) emission reductions, either in the form of allowance or ‘credit’ that the buyer can use to sustain and develop CDM projects. Payment for emission reduction can be made using cash, equity, debt or in-kind contribution such as providing technologies to abate GHG emissions.
Emissions trading (or cap and trade), in fact, is an administrative approach used to control pollution by providing economic incentives for achieving reduction in the emissions of six greenhouse gases - carbon dioxide, methane, nitrous oxide, hydrofluorocarbons, perfluorocarbons and sulphur hexafluoride - specified under Kyoto Protocol.
In such a plan, a central authority (Central Government) sets a limit or cap on the amount of a pollutant that can be emitted. Companies or other groups that emit the pollutants are given credits 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. This transfer is referred to as trade. In effect, the buyer is being fined for polluting, while the seller is being rewarded for having reduced emissions. The more firms that need to buy credits, the higher the price of credits become, which makes reducing emissions cost-effective in comparison.
The overall goal of an emission trading plan is to reduce pollution. In some cases, the cap may be lowered over the time. In other systems, a portion of all traded credits must be retired, causing a net reduction in emissions each time a trade occurs.
In many cap and trade systems, organisations which do not pollute may also buy credits. While the cap is usually set by a political process, individual companies are free to choose how or if they will reduce their emissions. Moreover, the government does not need to regulate how much each individual company emits, making cap and trade a very cost-effective method of controlling pollution on a large scale.
A country (or group of countries) caps its carbon emissions at a certain level (this is known as cap and trade) and then issues permits to firms and industries that grant the firm the right to emit a stated amount of carbon dioxide over a time period. Firms are then free to trade these credits in a free market. Firms whose emissions exceed the amount of credits they possess will be heavily penalised.
Says Aggarwal, “The idea behind carbon trading is that firms that can reduce their emissions at a low cost will do so and then sell their credits on to firms that are unable to easily reduce emissions. A shortage of credits will drive up the price of credits and make it more profitable for firms to engage in carbon reduction. In this way the desired carbon reductions are met at the lowest cost possible to society.
First Published: Jan 02, 2007 16:36 IST