Clean Development Mechanism


Punjab Energy Development Agency (PEDA) is Designated as a Nodal Agency to Carbon Credits and Clean Development Mechanism for eligible Projects within the state vide Punjab Government Notification No 8/21/2005 STE (1)/1578 Dated 26.4.2006. What is Clean Development Mechanism:

India is a party to the United Nations Framework Convention on Climate change (UNFCCC) and the objective of the Convention is to achieve stabilization of greenhouse gas concentration in the atmosphere at a level that would prevent dangerous anthropogenic interference with the climate system. To strengthen the developed country commitements under the Convention, the parties adopted Kyoto Protocol in 1997, which commits developed country Parties to return their emissions of greenhouse gases to an average of approximately 5.2% below 1990 levels over the period 2008-12.

The Kyoto protocol provides for quantified emission limitations and reduction commitement for the developed countries and mechanisms to facilitate compliance with these targets, reporting and review and it lists six greenhouse gases – carbon dioxide (CO2) , Methane (CH4), Nitrous Oxide (N2O), Hydrofluorocarbons (HFCs), Perfluorocarbons (PFCs) and Sulphur hexafluoride (SF6) India acceded to the Kyoto Protocol in August 2002 and one of the objectives of acceding was to fulfill prerequisites for implementation of Clean Development Mechanism (hereinafter referred to as CDM) projects, in accordance with national sustainable priorities, where- under, a developed country would take up greenhouse gas reduction project activities in developing countries where the costs of greenhouse gas reduction project activities are usually much lower with the purpose to assist developed country parties in achieving compliance with their quantified emission limitation and reduction commitements.

Carbon Credit:

In addition to the burning of fossil fuels, major industry sources of green house gas emissions are cement, steel, textile, and fertilizer manufactures. The main gases emitted by these industries are methane , nitrous oxide, hydroflurocarbons, etc, which increase the atmosphere's ability to trap infrared energy..

For trading purposes, one credit is considered equivalent to one tonne of CO2 emissions. Such a credit can be sold in the international market at the prevailing market price. There are two exchanges for carbon credits: the Chicago Climate Exchange and the European Climate Exchange.

Mechanism of availing Carbon Credits:

The concept of carbon credit trading seeks to encourage countries to reduce their GHG emissions, as it rewards those countries which meet their targets and provides financial incentives to other to do so as quickly as possible. Surplus credits (collected by overshooting the emission reduction target) can be sold in the global market. One credit is equivalent to one tonne of CO2 emission reduced. CC are available for companies engaged in developing renewable energy projects that offset the use of fossil fuel. Developed countries have to spend nearly $300-500 for every tonne reduction in CO2, against $10-$25 to be spent by developing countries. In countries like India, GHG emission. On the contrary, they are entitled to sell surplus credits to developed countries. It is here that trading takes place. Foreign companies who cannot fulfil the protocol norms can buy the surplus credit from companies in order countries through trading.

Thus, the stage is set for Credit Emission Reduction (CER) trade to flourish. India is considered as the largest beneficiary, claiming about 31% of the total world carbon trade through the Clean Development Mechanism (CDM), which is expected to rake in at least $5-10bn over a period of time.

List of activities eligible for availing Carbon Credits:

What is Kyoto Protocol:

The Kyoto Protocol provides for three mechanisms that enable developed countries with quantified emission limitation and reduction commitements to acquire greenhouse gas reduction credits. These mechanisms are joint implementation (JI), Clean Development Mechanism (CDM) and international Emission Trading (IET).

nder JI a developed country with relatively high costs of domestic greenhouse reduction would set up a project in another developed country that has a relatively low cost. Under CDM, a developed country where the cost of greenhouse gas reduction project activities are usually much lower. The developed country would be given credits for meeting its emission reduction targets,while the developing country would receive the capital and clean technology to implement the project. Under IET, countries can trade in the international carbon credits market. Countries with surplus credits can sell them to countries with quantified emission limitation and reduction commitements under the Kyoto Protocol.

The Kyoto Protocol to the united Nations Framework Convention on Climate Change is an amendment to the international treaty on climatechange, assigning mandatory emission limitations for the reduction of greenhouse gas emissions to the signatory nations.

The objective is the "stabilization of greenhouse gas concentrations in the atmosphere at a level that would prevent dangerous anthropogenic interference with the climate system."

As of December 2006, a total of 169 countries and other governmental entities have ratified the agreement (representing over 61.6% of emissions fron Annex I countries) Notable exceptions include the united states and Australia. Other countries, like India and China, which have ratified the protocol, are not required to reduce carbon emissions under the present agreement.

There is still some debate about the usefulness of the protocol, and there have been some cost-benefit studies performed.


PP - Project Proponent
DOE - Designated Operational Entities
AE - Applicant Entity
EB - Executive Board
COP/MOP - Conference of the Parties and Meetings serving as the meeting of the Parties to the Kyoto Protocol
CER - Certified Emission Reductions
DNA - Designated National Authority