Introduction to Carbon Market
Yves TUYISHIME
REMA
Outline
1. Carbon Market
2. The Clean Development Mechanism
(CDM)
3. Kyoto Protocol
4. Carbon Market: Is it happening in
Rwanda?
CARBON MARKET
What is the carbon market?
• The carbon market is like any other market, but in this particular
market “people” are shopping for “carbon credits” measured in
tCO2e.
Source: Freefoto.com
What is carbon credit?
1 Carbon credit = 1 ton of CO2
• CERs
• Emission Reductions Units
• Verified Emission Reductions
1 Carbon credit = 1 ton of CO2
Currently the price of one carbon credit varies between 6$ and 8 $
Who are the Buyers & Sellers?
 Buyers
• Compliance buyers, i.e. (big) carbon emitters from developed countries
which have commitment to kyoto protocol.
• Voluntary buyers, e.g. corporations , e.g. as part of Corporate Social
Responsibility initiatives (being “green”), attract potential clients, satisfy
eco-conscious shareholders, new investment opportunities, risk
management or part of their philosophy individuals, e.g. offset your
holiday flight, (NGOs) etc….
 Sellers
• Developing countries, i.e. Lower emission countries or with large
tracks of forests
• Developed countries, i.e. countries trading off their surplus in carbon
credits
Types of Carbon Markets
 Regulatory Markets
- Clean Development Mechanisms
-Joint implementation
 Voluntary Carbon Market
Voluntary Market
• The voluntary market represents those who wish to compensate
voluntarily for emissions associated with their operations–either
as part of a commitment to corporate responsibility or to attract
green consumers. They have no legal requirement to participate.
-Voluntary carbon standard VCS
-Plan Vivo
-Gold standard, etc….
Regulatory Market
- Clean Development Mechanisms
- Joint implementation
CLEAN DEVELOPMENT MECHANISM
(CDM)
The Clean Development Mechanism
• Flexible mechanism under the Kyoto Protocol
• Two goals:
• Reduce greenhouse gas emissions
• Assist sustainable development in developing countries
• Cooperation between Annex-1 countries and non-Annex 1 countries
Kyoto Protocol
 Establishes legally binding commitments for the reduction of GHGs
 Adopted in 1997, Ratified in July 2004, entered into force in
February 2005,and had to expire in 2012 (As of august 2011,191
Countries are parties to KP)
 Protocol to the 1992 UN Framework Convention on Climate
Change (UNFCCC)
 Requires Annex 1 countries (West and Eastern Europe, North
America, Japan, New Zealand, Australia – industrialised
countries) to reduce overall emissions of greenhouse gases by at
least 5.2% during 2008 – 2012
 Voluntary participation of Non-Annex 1 countries (China, India,
etc. – “developing countries”)
 Clean Development Mechanism (CDM) involves Annex 1 and
non-Annex 1 countries
GHGs covered by KP cont…
GHG
Description
Carbon Dioxide(CO2)
The most Important GHG
Generated from fossil fuel burning and
deforestation
Methane(CH4)
Comes from landfills, coal mines, oil and
natural gas operations and agriculture
Nitrous Oxide(NH20)
Emitted from the use of nitrogen fertilizers,
from burning fossil fuels and some industrial
and waste management processes
Sulfur-hexafluoride (SF6)
Used in electrical insulator, freezing agent and
heat conductor
Hydro-fluorocarbons(HFCs)
and
These are groups of gazes used as alternative
to ozone-depleting in refrigeration systems
Per fluorocarbons (PFCs)
GHGs covered by the KP
Sulphur
hexafluoride (SF6)
GWP: 23,900
Methane
(CH4)
GWP: 21
Nitrous oxide
(N2O)
Carbon
dioxide (CO2)
GWP: 310
GWP: 1
Hydrofluorocarbons
(HFCs)
Perfluorocarbons
(PFCs)
GWP:11,700
GWP: 9,200
Each GHG has a different Global Warming Potential
INTRODUC
TION TO
CDM
Eligibility criteria
1.
2.
3.
4.
5.
6.
Reduction in GHG Emissions covered by the KP
Host country (Rwanda) must be a Party to the Kyoto Protocol
Contribution to Sustainable Development of Rwanda
Additionality
Emission reduction must be real, measurable and long term
Sector must be eligible
Eligible sectors
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Energy industries (Production &Distribution)
Manufacturing industries
Construction
Transport
Mining/mineral production
Metal production
Fugitive emissions from fuels (solid, oil and gas)
Fugitive emissions from production and consumption of halocarbons and sulphur
hexafluoride
Solvent use
Waste handling and disposal
Afforestation and reforestation
Agriculture
How does it work?
Non-Annex I
Annex I
Carbon value (€)
Buyer
Emissions
reductions
needed
Emissions
reductions
target
Emissions
reductions
achieved
Seller
Certified Emissions Reductions (CERs)
How to develop a CDM project and create
carbon credits?
Project Idea
Project
Note
Design
(PP)
Document (PP)
Host
Country
Approval
(DNA)
Registration
(EB)
Implementation
& Monitoring
(PP)
Validation
(DOE)
Verification
(DOE)
Issuance
(EB)
Legend
DNA
Designated National Authority
DOE
Designated Operational Entity
PP
Project Participants
EB
CDM Executive Board
CERs
Certified Emission Reductions
(Validator / Verifier)
C
E
R
S
Is it happening in Rwanda?
23 CDM projects in pipeline
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improved cookstove projects
water purification
hydropower
efficient lighting projects: Solar lighting
Rechargeable light by pedal machine
CFL project
rwandadna@gmail.com
www.rema.gov.rw/dna