Kyoto protocol –a great business opportunity!

.What is Kyoto protocol?

- History
 united nations framework convention on climatic change
 ratification

. Member’s obligation
 reduction of carbon dioxide and other greenhouse gasses
 Do developing nations have also to go hardship?
 Can members trade carbon produced in there country?
 Levels to achieve by 2008-20012

. Business opportunity
 cost of implementation
 cost benefit analysis
 Do developing nations have an edge?

. India’s prospects
 resources
 government assistance

.Threats
 non ratification by one of the leading producer of carbon
dioxide

What is Kyoto protocol?

History –
The concept of sustainable development dates back a long way but it
was at the UN Conference on Human Environment (Stockholm, 1972)
that the international community met for the first time to consider
global environment and development needs.
It is actually an amendment to the United Nations Framework
Convention on Climate Change (UNFCCC). Countries that ratify 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.

Ratification –

The treaty was negotiated in Kyoto, Japan in December 1997, opened

for signature on March 16, 1998, and closed on March 15, 1999. The
agreement came into force on February 16, 2005 following ratification
by Russia on November 18, 2004. As of September 2005, a total of
156 countries have ratified the agreement (representing over 61% of
global emissions).

Participation in the Kyoto Protocol, where dark green indicates

countries that have signed and ratified the treaty and yellow indicates
states that have signed and hope to ratify the treaty. Notably, Australia
and the United States have signed but, currently, decline to ratify it.

Members obligation
The protocol commits 38 industrialized countries to cut their emissions
of greenhouse gases between 2008 to 2012 to levels that are 5.2 per
cent below 1990 levels.
National targets range from 8% reductions for the European Union
and some others to 7% for the US, 6% for Japan, 0% for Russia, and
permitted increases of 8% for Australia and 10% for Iceland."

Do developing nations also have to suffer hardship –

The largest share of historical and current global emissions of

greenhouse gases has originated in developed countries and since
the per-capita emission rates of the developing countries are a tiny
fraction of those in the developed world the developing countries have
been exempted from implementation for reduction of ghg gasses.

Can members trade carbon produced in there country –

(Emission trading)

Every country would be assigned a specified quota for production of

ghg gasses. Assigned amount units (AAUs), assigned to each country
under the Protocol, based on the country's emission reduction target,
and may be traded on the IET market, along with other tradable units
established by the protocol:

 emission reduction units (ERUs), created through joint

implementation projects;
 certified emission reduction units (CERs), created through clean
development mechanism (CDM) projects; and
 Removal units (RMUs), created through carbon-sink (land-use)
projects.

The Marrakesh Accords (7th Conference of the Parties) (the Accords)

under the Protocol allow for businesses, non-governmental
organizations and other legal entities to participate in IET, joint
implementation projects and CDM projects, under the authority and
responsibility of parties to the Protocol.

Business opportunity

The business community is clearly signaling the pro-Kyoto route

governments must take. Catalyst Paper, a leading North American
paper producer has joined WWF's Climate Savers Program and
pledged to reduce its CO2 emissions 70 per cent below 1990 levels by
2010.

COME GLOBALISATION and trade take on different hues-Trading of

carbon credits or more specifically carbon dioxide credits between
developing and developed nations. This becomes particularly relevant
when CO {-2} emissions from developed countries are way beyond
those from the developing countries.

Cost benefit analysis –

It is possible to try to evaluate the Kyoto Protocol by comparing costs

and gains, though there are large uncertainties. Economic analyses
disagree as to whether the Kyoto Protocol is more expensive than the
global warming that it avoids; the recent Copenhagen consensus
project analysis found it to have an overall benefit, though less than an
"optimal" carbon tax.

Do developing nations have an edge?

The catch however is the cost — developed countries have to spend

nearly $300-500 for every tonne reduction in CO {-2} emission.
Contrast this with $10-25 to be spent by the developing countries. The
stage is thus set for trade to flourish. Trading carbon credits is hence
seen as a less expensive option. Yet, there is a limit to which
developed nations can buy credits.

Recent developments –

In March this year, Det Norske Veritas (DNV) of Oslo, Norway, well
known in the field of ISO certification was accredited by the UN to act
as a validating body. The first organization to get the accreditation,
DNV has already lapped a few projects around the world.

India’s prospects –

The Clean Development Mechanism enshrined in the Kyoto Protocol

gives Indian industry, the opportunity to implement greenhouse gas
reduction projects taking advantage of the markets for trading
emissions. Such trading will also make a large variety of energy
conservation and alternative energy projects more viable. A number of
trading systems are active in North America and Europe.
Another advantage of implanting cleaner and sustainable technologies
is the ability to avail funding from Prototype carbon Fund which is
under the aegis of the World Bank. The fund is formed by contributions
from many developed nations.

Threats -------

The United States and Australia have not yet ratified the contract.
United States being the largest producer of the the greenhouse
gasses , it becomes quite imperative to have the u.s ratify the protocol
for the overall implementation and success of the project .