Euro norms & carbon trading

Environmental Management(Pollution – Air & Atmosphere)

Prof. Sandeep Hegde

Pollution

• Contamination of Earth’s environment with materials that interfere with human health, the quality of life, or the natural functioning of ecosystems (living organisms and their physical surroundings).

• Although some environmental pollution is a result of natural causes such as volcanic eruptions, most is caused by human activities.

Pollution

Types of Pollution

Air Water SoilNoiseAtmosphere

Air Pollution

Air pollution may be defined as the presence in the air (outdoor atmosphere) of one or more contaminants or combinations thereof in such quantities and of such durations as may be or tend to be injurious to human, animal or plant life, or property, or which unreasonably interferes with the comfortable enjoyment of life or property or conduct of business.

CUMULATIVE EMISSIONS 1950-2003 Rank Country MtCO2 World

totalTons CO2 per person

1 USA 230,200.80 26.37% 791.6

2 EU (25) 187,773.90 21.51% 411.6

3 CHINA 83,515.60 9.57% 64.8

4 RUSSIAN FEDERATION 81,779.50 9.37% 565.6

5 GERMANY 49,946.20 5.72% 605.1

6 JAPAN 41,057.30 4.70% 321.8

7 UK 31,415.702 3.60% 527.3

8 INDIA 22,098.00 2.53% 20.8

9 UKRAINE 21,722.20 2.49% 454.3

10 FRANCE 19,854.90 2.27% 330.8

* per capita emissions Source: Times of India, 11 May 2007

EURO I & II • What are Emission Norms?

Emission norms are prescribed CO (Carbon Monoxide), HC (Hydrocarbons) and NOX (Nitrous oxide) levels set by the government which a vehicle would emit when running on roads. All the manufacturers need to implement the same for vehicles being manufactured from the date of implementation.

• What are Euro Norms?Euro norms refer to the permissible emission levels from both petrol and Diesel vehicles, which have been implemented in Europe. However in India, the government has adopted the Euro norms for available fuel quality and the method of testing. Euro-1 norms in India are known as INDIA 2000 since it was implemented from 1/4/2000. The norms equivalent to Euro-2 are called 2005 norms.

EURO I & II

• WHAT ARE THE EURO I AND EURO II NORMS?The Euro norms require manufacturers to reduce the existing polluting Emission Levels in a more efficient manner by making certain technical changes in their vehicles.

EURO I & II

• WHAT CHANGES DO MANUFACTURERS HAVE TO MAKE IN ORDER TO MAKE EURO COMPLIANT VEHICLES?The following changes normally will be made by manufacturers in order to have a EURO I compliant cars. Typically, the following areas would require attention: (a) carburetor retuning (b) secondary air intake. (c) exhaust gas recirculation (d) catalyser capacity increase (e) trimetal coating in the catalyser.

• Changes for having a Euro II compliant vehicle require that the carburetor be replaced by an MPFI system i.e. a Multi-point Fuel Injection System. There are two basic types of engines, spark ignition and compression ignition engines. In the former, fuel ignition is triggered by an electric spark from a spark plug, while in the latter, atomized liquid fuel is injected with the help of a fuel pump and a nozzle into a cylinder full of hot compressed air, which results in ignition taking place. Larger cylinders which need more fuel require more than one injector, thus resulting in a multi-point fuel injection system.

EURO EMISSION NORMS Euro emission norms are standard emissions of carbon-mono oxide (CO), hydro carbon (HC), nitrogen oxide (NOx) & particulate matter. they have been defined in terms of grams/km & grams/KWh (by engine power) for passenger cars & heavy vehicles respectively.

The latest Norm EURO-V requires heavy goods vehicle to follow these standards :

• NOx = 2.0 kg/KWh (maximum) • PM = 0.02 g/KWh • CO = 1.5 g/KWh • HC = 0.46 g/KWh • Smoke = 0.5 g/KWh

Chronology of Euro Norms

norms = operational year = vehicle type

• EURO-I = 1993 = for passenger car

• EURO-II = 1996 = for passenger car

• EURO-III = 2000 = any vehicle

• EURO-IV = 2005 = any vehicle

• EURO-V = 2008 = for heavy good vehicle

Euro-IV Emission Norms In Phases By 2010 NEW DELHI: The government has laid out a phased programme for introducing Euro-IV vehicular emission norms in the country by 2010. This will require an investment of Rs 55,000 crore by oil and automobile companies in improving fuel quality and vehicular engine specifications.

Addressing a news conference in the Capital on Monday, petroleum minister Ram Naik said the Cabinet has approved an auto fuel policy that lays a roadmap for implementing Euro-II, III and IV vehicular emission standards by 2010. All automobiles and fuel — petrol and diesel — will have to meet Euro-III emission specifications in the above 11 cities from April 1, 2005 and Euro-IV norms by April 1, 2010. The rest of the country will have Euro-III emission norm compliant automobiles and fuels by 2010. The Bharat stage II (equivalent to Euro-II norms), which are currently in place in 11 cities — Delhi, Mumbai, Kolkata, Chennai, Bangalore, Hyderabad, Ahmedabad, Pune, Surat, Kanpur and Agra — will be applicable to all automobiles throughout the country from April 1, 2005. For two/three wheelers, Bharat Stage-II norms will be applicable from April 1, 2005 and Euro-III norms would come in force preferably from April 1, 2008 but not later than April 1, 2010, he said.

“The domestic oil refineries, which have already invested Rs 10,000 crore to achieve Euro-I auto fuel specifications, would need to incur an additional investment of around Rs 18,000 crore by 2005 and another Rs 12,000 crore by 2010. The investment requirement of the automobile industry is estimated at around Rs 25,000 crore over this period,” Mr Naik said. Petroleum minister said the policy broadly gives a roadmap for achieving various vehicular emission norms over a period of time and corresponding fuel quality upgradation requirements.

“While it does not recommend any particular fuel or technology for achieving the desired emission norms, it suggests, taking into account security of supplies and existing logistics perspectives, that liquid fuels should remain as main auto fuels throughout the country and that the use of CNG/LPG be encouraged in cities affected by higher pollution levels,” he said. The ministry of petroleum and natural gas will ensure fuel quality while the ministry for road transport and highways will monitor automobiles engine specifications. Pollution checks will be the responsibility of ministry of environment.

“The auto fuel policy has deviated from the RA Mashelkar Committee recommendations on two counts. Firstly, the fiscal concessions like excise duty relief have not been provided immediately. This aspect will be looked after in the annual budget. Secondly, the proposal to form a national automobile pollution and fuel authority has not been accepted and individual ministers will continue to monitor standards,” he said.

Mr Naik said after April 1, 2007, inter-state buses/trucks would not be allowed to originate/terminate in Delhi unless they meet minimum of euro-I emission norms. The cut off point for meeting Euro-II norms will be April 1, 2011.

“In other cities, all inter-state buses will have to meet a minimum of 1996 emission norms from April 1, 2006 and Euro-I norm from April 2008,” he added.   

Source : Financial Express (Online Edition)   (10/6/2003)

The Atmosphere

The Greenhouse effect

• The earth receives energy from the sun, which warms the earth’s surface. As this energy passes through the atmosphere, a certain percentage (about 30) gets scattered.

• Some part of this energy is reflected back into the atmosphere from the land and ocean surface. The rest (70%) actually remains behind to heat the earth. In order to establish a balance, therefore, the earth must radiate some energy back into the atmosphere.

• As the earth is much cooler than the sun, it does not emit energy as visible light. It emits through infrared or thermal radiation. However, certain gases in the atmosphere form a sort of blanket around the earth and absorb some of this energy emitted back into the atmosphere.

The Atmosphere

The Greenhouse effect

• Without this blanket effect, the earth would be around 30 ° C colder than it normally is.

• These gases like carbon dioxide, methane, and nitrous oxide, along with water vapour, comprise less than one per cent of the atmosphere. They are called 'greenhouse gases' as the working principle is same as that which occurs in a greenhouse.

• Just as the glass of the greenhouse prevents the radiation of excess energy, this ‘gas blanket’ absorbs some of the energy emitted by the earth and keeps temperature levels intact.

• This effect was first recognized by a French scientist, Jean-Baptiste Fourier, who pointed out the similarity in what happens in the atmosphere and in a greenhouse. Hence the term the ‘greenhouse effect’.

The Greenhouse Effect

Greenhouse Gases

Kyoto Protocol recognizes six GHGs

1. Carbon dioxide

2. Methane

3. Nitrus oxide

4. Sulpher hexafluoride

5. Hydrofluorocarbons

6. Perfluorocarbons

GREENHOUSE EMISSION BY SOURCE

Stern Review

Global Conventions on Air and Atmosphere Pollution Abatement• 1971: Polluter Pays the Principle, OECD (Organisation

of Economic Cooperation and Development) Council says that those causing pollution should pay the costs.

• 1972: Conference on Human Environment, the historical Conference on Human Environment held in Stockholm in June 1972 was the first global recognition that the environment was endangered and the governments and the industry had to collectively put in an effort. For the first time the developed countries realised that they had completely ignored the impact on the environment during their rapid development. Since then, with the forming of the UNEP (United Nation Environment Programme), almost all countries have undertaken to monitor the quality of their air, water and other components of the natural world.

Global Conventions on Air and Atmosphere Pollution Abatement• 1985: Vienna Convention for the Protection of the

Ozone Layer was attended by 21 countries and the European Community. It was the same year that the hole in the ozone layer over the Antarctica was first discovered. This convention created a general obligation for countries to take appropriate measures to protect the ozone layer.

• 1987: Montreal Protocol on Substances that Deplete the Ozone Layer was finalizing and approval and entered into force in 1989. 36 countries that together accounted for 80% of the CFC consumption ratified it.

• 1988: The Intergovernmental Panel on Climate Change(IPCC) was set up to assess the technical issues that were being raised. Its first report stated that the possibility of global warming had to be taken seriously.

Global Conventions on Air and Atmosphere Pollution Abatement• 1988: The Intergovernmental Panel on Climate

Change(IPCC) was set up to assess the technical issues that were being raised. Its first report stated that the possibility of global warming had to be taken seriously.

• 1992: Earth Summit the United Nations Conference on Environment and Development (UNCED), was held in Rio de Janeiro in Brazil. The gathering momentum on environmental issues was given support and global focus and Agenda 21 was set out as a blueprint for action for the 21st century. The Rio conference was significantly different from the Stockholm conference – it was not about the environment itself but about the world economy and its effects on the world environment.

Global Conventions on Air and Atmosphere Pollution Abatement• 1992: United Nations Framework Convention on

Climate Change (UNFCCC) - the centerpiece of global efforts to combat global warming. It was adopted in May1992 at the Rio Earth Summit, and entered into force on March 21st, 1994. The Convention's primary objective is the stabilization of greenhouse gas concentrations in the atmosphere at a level that would prevent dangerous anthropogenic (man-made) interference with the climate system.

• 1995: The First Conference of the Parties (COP-1) to the FCCC, the UN Framework Convention on Climate Change took place in Berlin from 28 March - 7 April 1995. It comprised of 170+ nations that have ratified the Convention and is expected to continue meeting on a yearly basis.

THE KYOTO PROTOCOL• As a response to the climate change threat, following the

evidence of human impact on climate, the United Nations Framework Convention on Climate Change (UNFCCC) was established in 1992. Governments realised that stronger commitments were needed to mitigate climate change. Following years of negotiations, the Kyoto Protocol entered into force on February 16, 2005.   It established legal commitments for participating countries to reduce their emissions, or suffer financial penalties.

• The Kyoto Protocol requires the signatory countries to reduce, or limit their emissions relative to their base year. Each country has been given a target related to the base year (normally 1990), and the combined effect of this should reduce these countries’ greenhouse gas emissions by 5% per year in the period 2008–2012.

The Kyoto Protocol - 1997

• 159 nations attending the Third Conference of Parties (COP-3) to the United Nations Framework Convention on Climate Change (held in December 1997 in Kyoto, Japan) agreed to reduce worldwide emissions of greenhouse gases. Delegates to COP-3 agreed to the following specific provisions.

• Thirty-eight developed countries agreed to reduce their emissions of six greenhouse gases. Collectively, developed countries agreed to cut back their emissions by at least 5% below 1990 levels between 2008 and 2012.

The Kyoto Protocol - 1997• Developing Countries - Countries which are in the

process of becoming industrialized but have constrained resources with which to combat their environmental problems, which include China and India, have no formal binding targets, but have the option to set voluntary reduction targets.

• The Kyoto Protocol also established emissions trading, joint implementations, and clean development mechanisms to encourage cooperative emission reduction projects between developed and developing countries. The reductions must be additional to any that would have occurred without the project taking place. Certified emission reductions (CERs) generated can be used to meet reduction commitments or they can be traded on the open market as a futures commodity.

After Kyoto…..CopenhagenCopenhagen 2009 is THE rendezvous for the future of the planet!

• The most important international meeting on climate change since the one at which the Kyoto Protocol was adopted will be held from December 7-18 2009 in Copenhagen, Denmark. Nicknamed "COP 15," the 15th Conference of the Parties to the United Nations Framework Convention on Climate Change (UNFCCC) will bring together leaders from 193 countries in an attempt to reach agreement on efforts required to reduce their greenhouse gas (GHG) emissions in the medium and the long term and to adapt to climate change that is already underway.

• Discussions should result in the signing of an agreement that will define new objectives for the international community in the fight against climate change, extending the Kyoto Protocol that ends in 2012.

• Copenhagen will be a decisive moment. Decisions made at this meeting could have an impact on the future of all current inhabitants of the planet and on many generations to come

202020

• At Copenhagen last December, India emerged as an unlikely partner, alongside the United States, China, Brazil, and South Africa, in brokering a political accord that saved the climate summit from collapse. Delhi has since formally pledged to reduce the emissions intensity of its GDP by 20–25 percent from 2005 levels by 2020, which will slow the growth rate of its greenhouse gas output.

On a Mission: India’s National Action Plan on Climate Change –

June 2008• National Solar Mission • National Mission on Enhanced Energy

Efficiency • National Mission on Sustainable Habitat • National Water Mission • National Mission for Sustaining the

Himalayan Ecosystem • National Mission for a “Green India” • National Mission for Sustainable Agriculture • National Mission on Strategic Knowledge for

Climate Change

WHAT IS A CARBON CREDIT?

• A Carbon Credit is created when the equivalent of one metric tonne of carbon dioxide is prevented from entering the atmosphere.  Internationally known as Certified Emission Reductions, Emission Reduction Units, or Verified Emission Reductions, each carbon credit has a monetary value depending on the type and origin of the emission reduction produced.  

WHAT ARE THEY WORTH?Each carbon credit can be traded on the open market, with the current spot rates on the European Union’s Emission Trading Scheme averaging 25 Euros per tonne during 2008, (EUA DEC ’08).  With the onset of the current global financial crisis and the reduction in the price of oil, the emissions market has be affected.  Please see the current spot rate as indicated by the graph to the right.  As the economy begins to recover and the price of oil rises, the value of carbon credits will also increase.

WHO BUYS CARBON CREDITS?• Carbon credits are mostly purchased by governments &

corporations who have a legal or moral duty to reduce their carbon footprint.  Although these organizations could implement change in their home country by sponsoring emission reduction projects locally, the economic benefits of deploying an equivalent emissions reduction scheme in the developing world for a fraction of the cost is what drives the international trade in ‘carbon offsets’.

• Carbon offsetting is the process by which a successful emissions reduction is produced in one geographical location and claimed by another.  For example, a hydro electricity generation plant established in South America with the financial assistance of the Japanese government displaces the more polluting local oil & coal fired power stations, thereby creating a sizable carbon emissions reduction. In return for providing the financial assistance, (without which the project would not have occurred), and allowing the international transfer of technology to support the plant, the Japanese government may claim the carbon emission reduction for their home country, thereby offsetting their national carbon reduction commitments.In return, the developing nation develops sustainable resources, retains first world technology & benefits from a cleaner domestic environment.

Carbon Credits

• Carbon Credits are measured in units of certified emission reductions (CERs). Each CER is equivalent to one tonne of carbon dioxide reduction.

• India has emerged as a world leader in reduction of greenhouse gases by adopting Clean Development Mechanisms (CDMs) in the past two years.

• Developed countries that have exceeded the levels can either cut down emissions, or borrow or buy carbon credits from developing countries.

Role of UNFCCC• Only projects that carry the seal of approval from the

United Nations Framework Convention on Climate Change, (UNFCCC), can truly claim to have had their emissions reduction impact verified.  The two types of carbon credits created by UNFCCC approved projects are CERs and ERUs.  This is the legacy of the Kyoto Protocol.

• Receiving UNFCCC approval for emissions reduction projects in order to yield carbon credits is a complex procedure.  At both national and international levels, approvals, validations & verifications must be received.  This system separates the opportunist voluntary carbon projects from the true business of developing sustainability whilst reducing pollution in the developing world.

IS A CARBON CREDIT ALWAYS CARBON DIOXIDE?

Carbon credits are not always made up of purely carbon dioxide; there are six Greenhouse Gasses, (GHGs), classified by the UNFCCC as directly responsible for accelerating Global Warming. Carbon Dioxide, (CO2), is used as the base to measure all the other GHGs.  The term ‘tonnes of carbon dioxide equivalent’, or t-CO2e, is used to represent the impact of a particular atmospheric pollutant, based on the equivalent tonnes of CO2 the emission would represent.  Below, the six gasses are shown with the tones of CO2 equivalent they represent.

Green House Gas Carbon dioxide (CO2)Methane (CH4) Nitrous oxide (N2O) Perfluorocarbons (PFCs)Hydrofluorocarbons (HFCs)  Sulphur hexafluoride (SF6)

Cap-and-trade

• Carbon trading comes in two forms: mandated and voluntary. In a mandated carbon trading scheme, often called cap-and-trade, countries or firms are forced to reduce their GHG emissions to a certain level. In a voluntary carbon market, countries, firms, or individuals offset their emissions without legal necessity.

• The idea of cap-and-trade is based on the fact that greenhouse gas emissions are a global problem, not a local one. Scientifically, it does not matter whether our greenhouse gas emissions comes from New York or Jakarta. The effect on global climate is the same. Therefore, cap-and-trade’s main goal is be to reduce overall emissions with little regard for their origin.

Emissions Trading • Emissions trading (or cap and trade) is an administrative approach

used to control pollution by providing economic incentives for achieving reductions in the emissions of pollutants. In such a plan, a central authority (usually a government agency) sets a limit or cap on the amount of a pollutant that can be emitted. Companies or other groups that emit the pollutant 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 a 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 becomes -- which makes reducing emissions cost-effective in comparison.

• The overall goal of an emissions trading plan is to reduce pollution. In some cases, the cap may be lowered over 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, organizations which do not pollute may also buy credits. Environmental groups that purchase and retire pollution credits reduce emissions and raise the price of the remaining credits as per the law of demand.

Emission Trading Scheme(EU ETS)

• In January 2005 the European Union Greenhouse Gas Emission Trading Scheme (EU ETS) commenced operation as the largest multi-country, multi-sector Greenhouse Gas emission trading scheme world-wide.

• Launched in January 2005, the EU ETS is the world’s largest company level ‘cap-and-trade’ system for trading in emissions of carbon dioxide (CO2) and has quickly become the main driving force behind the expansion of the emerging global carbon market.

Emission Trading Scheme• A key aspect of the EU ETS is that it allows companies

to use credits from the Kyoto Protocol’s project-based mechanisms - the CDM and JI - to help them comply with their obligations under the system. This means the EU ETS not only provides a cost-effective means for EU-based industries to cut their emissions but is also channeling considerable business

• Allowances traded in the EU ETS will not be printed but held in accounts in electronic registries set up by Member States. All of these registries will be overseen by a Central Administrator at EU level who, through the Community independent transaction log, will check each transaction for any irregularities. In this way, the registries system keep track of the ownership of allowances in the same way as a banking system keeps track of the ownership of money.

• In India MCX and NCDEX are the two exchanges authorized to trade carbon credits.

Emerging carbon market: what’s it worth?

Lawmakers, such as the previous Secretary of State for the Environment, Rt Hon. David Miliband MP, passed legislation to cut 60% of CO2 emissions in the United Kingdom by the year 2050.

“…If all industrialized countries took on emission-reduction commitments of 60-80%, purchased half of their reductions in the developing world, with each credit valued at $10, the global market would be worth $100bn per year...”    [United Nations]

CDM Project Cycle

Carbon Credits – The Indian Scenario

• SAIL identifies 71 projects for carbon credits - Amid rising threat of global warming, country's leading steel producer SAIL has identified over 71 potential projects for availing carbon credits.

• SAIL has already registered one project--LD gas recovery from Steel Melting Shop-II for power generation at Rourkela Steel Plant--for carbon credit.

• Carbon credit is issued by Clean Development Mechanism (CDM) Executive Board for emission and reductions achieved by CDM projects and verified under the rules of Kyoto Protocol.

• SAIL has taken up a Rs 16-crore project to stop the use of approximately 268 million tons of carbon tetrachloride (cleaning solvent) for electrical machines and oxygen plant at its Bokaro, Durgapur, Rourkela, Bhillai and other steel plants.

• To ensure a clean environment in and around its plants and mines, the company said it has reduced air emissions by 4.7 percent to 2.2 kg per ton of crude steel in 2007-08. It has improved solid waste utilisation of up to 78.7 percent, reduced water consumption by 8 percent and planted about 2.6 lakh trees.

Carbon Credits – The Indian Scenario

• "There is a growing awareness among steel, cement and power companies about carbon credits. They are increasingly working on projects to avail carbon credits, which are widely traded commodity in the world now," Vandana Bharati, an analyst with Delhi-based SMC Brokerage firm, said.

• Total 295 Indian companies are registered with CDM for carbon credits. The country is the second largest seller of carbon credits in the global market, with 6 percent share in 2007.

Source: The Economic Times - May 26, 2008

References

• www.unfccc.de