Introduction to Carbon Market

Yves TUYISHIME

REMA

1. Carbon Market

2. The Clean Development Mechanism (CDM)

3. Kyoto Protocol

4. Carbon Market: Is it happening in Rwanda?

Outline

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 GHGGenerated 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)

INTRODUCTION TO

CDM

Each GHG has a different Global Warming Potential

Carbon dioxide (CO2)GWP: 1

Carbon dioxide (CO2)GWP: 1

Hydrofluorocarbons (HFCs)

Hydrofluorocarbons (HFCs)

Methane (CH4)Methane (CH4)

Sulphur hexafluoride (SF6)

Sulphur hexafluoride (SF6)

Nitrous oxide (N2O)

Nitrous oxide (N2O)

Perfluorocarbons (PFCs)

Perfluorocarbons (PFCs)

GHGs covered by the KP

GWP: 21

GWP: 310

GWP: 9,200

GWP:11,700

GWP: 23,900

Eligibility criteria

1. Reduction in GHG Emissions covered by the KP

2. Host country (Rwanda) must be a Party to the Kyoto Protocol

3. Contribution to Sustainable Development of Rwanda

4. Additionality

5. Emission reduction must be real, measurable and long term

6. Sector must be eligible

Eligible sectors• 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?

Emissions reductions

targetEmissions reductions achieved

Buyer

Certified Emissions Reductions (CERs)

Carbon value (€)

Emissions reductions

needed

Seller

Non-Annex IAnnex I

How to develop a CDM project and create carbon credits?

Project Idea Note (PP)

Validation(DOE)

Project Design

Document (PP)

Registration(EB)

Implementation & Monitoring

(PP)

CERS

Verification(DOE)

Host Country Approval

(DNA)

Legend

DNA Designated National Authority

DOE Designated Operational Entity (Validator / Verifier)

PP Project Participants

EB CDM Executive Board

CERs Certified Emission Reductions

Issuance (EB)

Is it happening in Rwanda?

23 CDM projects in pipeline• improved cookstove projects• water purification• hydropower• efficient lighting projects: Solar lighting

Rechargeable light by pedal machine

CFL project

Murakoze rwandadna@gmail.com

www.rema.gov.rw/dna