Emission Trading

Greenhouse Effect

Earth receives energy from

the Sun in the form of
radiation.
Part of this energy (appx
30%) is radiated back in the
form of infrared radiation
Much of this radiation is
absorbed by atmospheric
gases such as CO2, Water
vapour and other gases, and
reradiated towards the
surface as more heat.

Greenhouse effect continues

Warming of the Earth's surface and lower

atmosphere caused by this absorption is known
as Greenhouse effect.
An increase in atmospheric concentrations of
gases such as CO2, NO2, Methane and chlorofloro-carbons resulting from human activities
may also intensify the greenhouse effect.

Greenhouse gases

Water vapor, CO2, NO2, Methane and chlorofloro-carbons causing greenhouse effect may
be called as Greenhouse gases (GHG) and
their effect is,

Water Vapour 36-70%

Carbon dioxide 9-26%
Methane 4-9%,

Greenhouse gases continues..

Water vapor is a naturally occurring

greenhouse gas and human activity does not
directly affect its concentration.
CO2, NO2 and three groups of fluorinated
gases (SF6, HFCs and PFC) are considered as
major greenhouse gases* under Kyoto
Protocol.

*caused by human activities- industrial processes, power generation,

agriculture byproducts etc.,

Kyoto Protocol

1997-Dec-11: An agreement made under

UNFCCC to reduce emission levels of GHGs
(UNFCC-United Nations Framework Convention on Climate Change)

Come into force on 2005-Feb

As of 2007-Nov, 174 countries/parties have
ratified the protocol.
174 Countries include Annex I (Industrially
developed countries + European Union) and
Non-Annex Countries.(Developing CountriesIndia comes into this)
6

Kyoto Protocol Continues..

Annex I countries commit to reduce their

emissions of GHGs by collective average of
5.2% from 1990 levels by the period 2008 to
2012
Non-Annex countries have no GHG emission
reduction
As of 2007-Dec, US and Kazakhstan are the
only signatory nations not to have ratified the
act.
Expires in 2012
7

Kyoto Protocol Continues..

Emission reduction mechanisms [1]

Kyoto Provides six different options to meet individual

emission reduction targets.

Policies and measuresgovernment regulations

Sinks enhancement(sinks are natural features like
forest cover, plants and the oceans which absorb the
greenhouse gases)
Joint fulfillment(Joint agreements by countries to
reduce emissions)
Joint implementation (JI)
Present
Clean development mechanism (CDM) interest of
Emission
Emissions trading (ET)
reduction
projects

Emission reduction mechanisms continues

Kyoto Mechanisms

Market Based

Project Based

Emission trading

Joint Implementation

Clean Development Mechanism

10

Project based mechanisms

JI is an arrangement in industrialized countries to

invest in emission reducing projects* in another
industrialized country (where costs of emission
reductions are significantly lower) as an alternative to
emission reductions in their own countries
The CDM is an arrangement allowing industrialized
countries with a GHG reduction commitment to invest
in emission reducing projects* in developing
countries as an alternative to more expensive
emission reductions in their own countries.

* Power generation from renewable energy sources, biomass, waste to energy, Reforestation
etcref http://cdmindia.nic.in/cdmindia/projectList.jsp

11

Market Based-Emission Trading

Emission trading is a market based

mechanism for helping to mitigate the
increase of CO2 in the atmosphere.
Emission trading markets are developing that
bring buyers and sellers of carbon credits
together with standardized rules of trade.

12

Carbon Credits

Credits are awarded to countries or groups that have

reduced their green house gases below their
emission quota.
Carbon credits can be traded in the international
market at their current market price.
The currency for this trade is called Carbon

Emission Reduction (CER).

One unit of CER is one ton equivalent of carbon
dioxide emission.

Greenhouse gas emissions are calculated in CO2equivalent metric tons (tCO2e).

CER prices now in the range of $8-15 per tCO2e
(2007) [2]
13

Business

Buy and sell Carbon emissions through

Joint Implementation

Annex I parties (mostly developed countries)

Clean Development Mechanisms

Non-Annex (India is here) and Annex I parties

Emissions Trading

Global

14

Who is selling?

Entities that manage forest or agricultural

land might sell carbon credits based on the
accumulation of carbon in their forest trees or
agricultural soils.
Similarly, business entities that reduce their
carbon emission may be able to sell their
reductions to other emitters

15

Who is Buying?

Any entity, typically a business, that emits CO2 to

the atmosphere may have an interest or may be
required by law to balance their emissions by
buying carbon credits.
Eg: Power generating facilities

16

Global GHG Emissions from various sectors

Power
generation
ultilities are
constituting the
major GHG
emissions.
72%
contribution is
from CO2
17

Power generation is the target

Power generation is a simpler target for government

action than other CO2 sources.
Emissions trading will most likely represent a central
tool for a majority of actors in the energy sector
Additional production cost will be added for electricity
generation.
A typical coal fired generation plant would be faced
with an additional cost of apprx. 10 USD/MWh
A typical natural gas fired generation plant would see
less than that of coal based generation.

18

Estimation of Carbon emission from a power

generation utility [3]

CO2 emissions per unit of electricity

generated depend upon,

Characteristics of the fuel -- the energy*

(GJ/kg of fuel) and carbon (kg C/kg of fuel)
content of the fuel.
Characteristics of power plant -- heat rate
(GJ/kWh).

*Kg C kilogram of Carbon, GJ- Giga Joule, heat content depends upon the
quality of the coal (coal has different grades from A..G)
19

CO2 emission Calculation

CO2 emissions per unit of net electricity generated
(kgC/kWh) =
CarbonContentOfTheFu el (kgC / kgFuel)
HeatRateOf TheFuel (GJ / KWh )
HeatValueOfTheFuel (GJ / kgFuel)

Carbon content of COAL = 25.8 kg C/GJ

Carbon content of LNG = 15.8 kg C/GJ
20

Source of Data for Calculation

The data required for the calculation of CO2

emission per unit of power generation may be
obtained from Power Purchase Agreements
(PPA) of individual generating utilities.

PPAs* are an authentic source of data on

proposed/existing power plants, since they
contain all the cost and power plant
performance information agreed as a
contractual requirement.
May be obtained from SEBs

*prepared and filed to the regulatory commissions (SERC) and are not
publicly available

21

Source of data continues..

PPA contains the following data.

22

Heat Rate and Emission

Heat rate (GJ/KWh)

Less heat rate reduces fuel consumption and

carbon emission
Renovation of old coal based power plants for
heat rate improvements.
NTPC to improve heat rates of all thermal
power plants (owned by itself and SEBs)
To adopt super critical technology.

23

Utility Emission monitoring

Require gas analyzers for emission monitoring

Require tools for calculations and reporting
Spread sheets (MS-Excel) or S/W is required
to be developed for this purpose (Data
acquisition)
Spread sheets are not reliable in view of

Data integrity
Data security
Data verifiability etc.,
24

Emission monitoring S/W [4]

The monitoring and reporting S/W is required

to have the following features.

Data acquisition
Data validation
Internal reporting
External reporting
Security
Logging/Audit

25

S/W features*

Data acquisition

Sources of emission
Mode of data retrieval (online)
Support all GHG emission

Data validation

Range checks
Deviation reporting
Unit of measured quantity

* This information is obtained from websites of various organizations in

this business

26

S/W features continues..

Internal reporting

Reports for internal purpose

(minute/hour/day/week..etc)
Internal distribution of reports
Forecasting
Actual Vs Forecast
Graphical views
Automatic report generation

27

S/W features continues..

External reporting

Crystal reports license is required

Reports may be exported to

PDF
Excel
XML
Word
CSV

28

S/W features continues..

Security

User-ids and passwords for users

Logging/Audit

Any manual changes of data

Validation changes
Summary of changes

29

Carbon business in India

In India the buy and sell of carbon emissions

is through CDM and ET mechanisms only.
Unilateral CDM Projects

Developing countries make the project alone

and sell CERs
The selling of CERs is Emission Trading
mechanism

Bilateral CDM Projects:

Annex-I countries make CDM projects in

developing countries.
30

Carbon business continues..

India stands second in selling CERs (15%)

after China (60%) from CDM projects (b/w
Jan-Sept, 2006) [2].

Times of India, 2 Jan 2008- India is

signing off the year 2007 with over 21
million certified emission reduction
(CERs) credits generated by clean
development mechanism (CDM) projects
during the year. This is nearly double
compared to what was generated in
2006, that is, over 12 million CERs.
31

Carbon business India..

Indian industries* are registering for CDM project

development and to sell CERs later (when market
prices up).
India register 219 CDM projects as on April 2007
(34.65% of globally regd. CDM projects) [2].

*eg: Sugar, chemical industries making

unilateral CDM projects

32

CDM Project Cycle [5]

Project Design Phase

Project opportunity and

Feasibility Study
Project Design
Preparation of CDM
documentation (PDD)
Approval from National
Authorities
Comments from public
Validation
Registration

Project Implementation

Implementation and
Monitoring
Verification
Certification
Issue of CERs

33

Players
Seller*
Sellers are
industries
holding CERs
for sale

Buyer

Consultant/
Service Provider/
Advisor

Buyers are
utilities seeking
CERs (to buy)

Consultant or advisor plays a

different role for two different
kinds of trading mechanisms
(CDM and ET).

*Holding CERs by having Unilateral CDM projects

34

Role of Advisor*

CDM Project

Feasibility study
Project Design Document (PDD) preparation
supporting Validation Process
Obtaining Host Country Approval
supporting Registration process
Preparation of Monitoring Report
Facilitating Verification & Issuance Process for CERs
Aid in procuring clean technology equipments at very
competitive delivery and price terms

*This information has been obtained from web sites of various organization involved in this
business.
35

Role of Advisor continues

ET

To guide for right time of sale (Market study)

Identification of buyers
Analyzing the offers
Emission reduction purchasing agreement
(ERPA)

36

Authorities

Designated National Authority (DNA)

DNA is the national authority to approve the CDM

project proposal.

DNAs of both countries approve in case of Bilateral CDM

Only host country DNA approves in case of unilateral
CDM

Designated Operational Entity (DOE)

Independent accredited party

validation (during design phase based on PDD)

verification (certifying after implementation of CDM
assuring the projected emission reductions are achieved)

37

Authorities..

CDM Executive Board (CDM EB-UNFCCC)

Approves the CDM project after validation and

approved by DNAs (registration)
Issue CERs based on DOE verification and
ERPA
Accreditation of DOEs

International Emission Trading Association

(IETA)

ERPA (format) developed by IETA.

38

Documentation

The following documents are produced at

various stages of CDM/Trading

PCN
Consultant
PDD
DNA Approval
Validation Report
DOE
Registration
Monitoring report -- Consultant
Verification/certification -- DOE
Issue of CERs -- CDM EB/UNFCCC

39

Who is in this business

Consultants

Zenith Energy, Division

of Zenith Corporate
Services (P) Ltd
Development
Alternatives (NGO)
Senergy Global
IRG Systems South Asia
Private Limited
Sustainable Energy
Solutions Pvt. Ltd.
Ernst & Young Tower
Winrock International
India (NGO)
MECON Ltd.,
MITCON Consultancy
Services Ltd.
Emergent Ventures
India Pvt. Ltd. (EVI),
gtz International Service
PWC

Indian DOEs

TUV / SUD
Suddeutschland India
TUV India Private
Limited
TUV Rheinland (India)
Pvt.Ltd
Det Norske Veritas
SGS India Private
Limited
BSI Management
System
Bureau Veritus
Certification India Pvt.
Ltd

40

Who.

Emission monitoring S/W

Pavilion Technologies
Environmental Software Providers (ESP)
Promasys Software
EPM (Netherlands)
Carbon Registry Services Ltd (CRS)
TechniData

41

CER Calculation [14]

Emission reduction = BE PE L

BE-Baseline Emissions
PE-Project emissions
L-Leakage

BE=EW X GEF

EW-Energy wheeled to the grid in KWh by the CDM project

GEF-Grid emission factor in tCO2/KWh

GEF ( wOM EFOM ) ( wBM EFBM )

Emission factor is calculated as weighted average of

Operating Margin and Build Margin emission Factors
The values of wOM and wBM depends upon the type
of the CDM project.
42

CER calculation contd.

Types of CDM projects

Methane recovery

CO2 projects

Landfill gas
Industrial waste water treatment
Wind, Solar, SHP
Utilization of waste heat and gas for power
generation

HFC-23 and N2O destruction

43

CER calculation contd.

Baseline emission

Electricity delivered to the grid by the project would

have otherwise been generated by the operation of
grid-connected power plants and by the addition of
new generation sources, as reflected in the combined
margin (CM).
EFOM (Operational Margin)

EFBM (Build Margin)

Effect of modifying the operation of existing power

plants connected to the grid

Effect of delaying the addition of new plants to the grid

A minimum of 3 years of historical power generation

data is required.
44

EFOM

EFOM may be calculated by using following

methods
Simple OM
Simple Adjusted OM
Dispatch data Analysis OM
Average OM

45

Simple OM

The Simple OM emission factor is calculated as the generationweighted average emissions per electricity unit (tCO2/MWh) of all
generating sources serving the system, not including low-operating
cost and must-run power plants*

F COEF

GEN
i, j, y

EFOM , y

i, j

i, j

j, y

COEFi NCVi .EFCO2 ,i .OXID i

y- year for which EF is calculated

i- type of fuel
j-power source
F- Amount of fuel in kg
COEF- CO2 emission coefficient (tCO2/kg Fuel)
GEN-electricity generated in MWh
NCV- net calorific value of fuel (GJ/kg Fuel)
EFCO2-emission factor (CO2/GJ)
OXID-Oxidation factor

*Low operating cost and must run resources typically include hydro, geothermal, wind, low-cost
biomass, nuclear and solar generation. If coal is obviously used as must-run, it should also be included
46
in this list

Simple Adjusted OM
This emission factor is a variation on the previous method,
where the power sources (including imports) are separated
in low-cost and must-run power sources (k) and other power
sources (j)

F COEF
(1 )
GEN
i, j, y

EFOM , y

i, j

i, j

j, y

F COEF
GEN
i ,k , y

i ,k

i ,k

k,y

No.ofHoursForWhichLow CostAndMustRunSourcesAreOnM arg in

8760

47

Dispatch Data Analysis OM

EFOM , y

EOM , y
EGy

EOM , y EGh .EFDD,h

EGy- Generation of CDM project (MWh)

EOM,y emissions
EFDD,h generation Weighted avg. emissions
per MWh (tCO2/MWh)
n- set of power plants in the top 10% of the
grid system dispatch order during hour h

F COEF

GEN
i ,n,h

EFDD,h

i ,n

i ,n

n,h

48

Average OM

The Average OM emission factor is calculated as the generationweighted average emissions per electricity unit (tCO2/MWh) of all
generating sources serving the system, including low-operating
cost and must-run power plants

F COEF

GEN
i, j, y

EFOM , y

i, j

i, j

j, y

49

EFBM

Choose a sample group with larger annual

generation:

the five power plants that have been built most

recently*
OR

the power plants capacity additions in the electricity

system that comprise 20% of the system generation
(in MWh) and that have been built most recently*

F COEF

GEN
i ,m, y

EFBM , y

i ,m

i ,m

m, y

*at the time of PDD

50

CER calculation of a CDM project supplying western grid

EFOM

51

EFBM

Group of power plants

that constitutes 20 % of
the system generation
and have been built
recently.

52

CERs of CDM project

53

References
1.
2.

Shashank Garimella, Emissions Trading, www.enzenglobal.com, July 03, 2006

C. LEE, J. BOGNER, AND A. TOEFY, LANDFILL GAS CDM PROJECTS:CURRENT
TRENDS AND FUTURE OPPORTUNITIES FOR DEVELOPING COUNTRIES,

Proceedings Sardinia 2007, Eleventh International Waste Management and Landfill

Symposium, S. Margherita di Pula, Cagliari, Italy; 1 - 5 October 2007
3.

4.

5.

6.

7.

Jayant Sathayea, Amol Phadkeb, Cost of electric power sector carbon

mitigation in India: international implications, Energy Policy, Volume 34,
Issue 13, September 2006, Pages 1619-1629
Getting the data right-A survey of information technology solutions to
meet EU Emissions Trading Scheme requirements, www.pwc.com
Paramdeep Singh, Clean Development Mechanism for Biomass based Power
Projects, www.dscl.com
Chi Zhang, P.R. Shukla, David G. Victor, Thomas C. Heller, Debashish Biswas and
Tirthankar Nag, Baselines for carbon emissions in the Indian and Chinese
power sectors: Implications for international carbon trading, Energy
Policy, Volume 34, Issue 14, September 2006, Pages 1900-1917
Arne Jakobsen, The interaction between electricity- and emissions trading
markets, with a specific view on demand response, IEA Symposium New
York

54

References..
8.
9.

10.
11.
12.
13.
14.

www.wikipedia.org
www.cdmindia.org
www.unfccc.int
www.emergent-ventures.com
www.ieta.org/
www.google.co.in
CDM - Executive Board/UNFCCC Revision to the approved consolidated baseline
methodology ACM0002 Consolidated baseline methodology for grid-connected electricity
generation from renewable sources ACM0002 / Version 06 19 May 2006

55