Business Ethics Group 4 PROJECT_2

8/3/2019 Business Ethics Group 4 PROJECT_2

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ETHICAL ISSUES IN CARBON

TRADING

15/03/2011

Group 4:

Aashir Agarwal (10FN-001) Rohan Dawani(10DM-124)

Ravi Bhambhani (10DM-123) Rohit Laumas(10DM-125)

Rishika Goel (10HR-029) Sanjay Rughwani(10DM-137)



AGENDA

Introduction

Kyoto Protocol & Implications

Ethical & Economic Issues

Analysis on various theories

Conclusion







GLOBAL WARMING & KYOTOPROTOCOL

Global warming is when the earth heats up (the temperaturerises). It happens when greenhouse gases (carbon dioxide, watervapor, nitrous oxide, and methane) trap heat and light from the sunin the earth’s atmosphere, which increases the temperature.

Kyoto Protocol to the United Nations Framework Convention on

climate change (UNFCCC), aimed at fighting global warming. Initially adopted on 11 December 1997 in Kyoto, Japan and entered

into force on 16 February 2005

191 states have signed and ratified the protocol.

Annex I countries agreed to reduce their collective greenhouse gas

emissions by 5.2% from the 1990 level The Protocol allows for several "flexible mechanisms", such

as emissions trading, the clean development mechanism (CDM)and joint implementation



CARBON CREDITS

Carbon credits are a key component of national andinternational emissions trading schemes that have beenimplemented to mitigate global warming

Carbon credits are certificates issued to countries thatreduce their emission of Green House Gases (GHGs)responsible for global warming

Measured in units of Certified Emission Reductions(CERs). Each CER is equivalent to one ton of CO2reduced.

For each ton of CO2 emission avoided, an entity wouldget a CER which could be sold through a futures marketto commercial and individual customers interested in



Contd.

Annex- I countries have to reduce pollutionlevels pre- 1990 era or trade carbon countrieswith developing nations or invest in

conservation. No immediate restrictions for Annex- A

countries.

Serves three purposes:- Avoids restrictions on growth.

Cannot buy carbon credits from industrializednations.

Transfer of money and technologies to developing



FLEXIBLEMECHANISMS

JI

CDM

ANNEX- I

TRADING



CLEAN DEVELOPMENT MECHANISM(CDM)

The Clean Development Mechanism (CDM) allows industrializedcountries with a greenhouse gas reduction commitment to invest inemission reducing projects in developing countries as an alternativeto what is generally considered more costly emission reductions intheir own countries

A developed country can take up a greenhouse gas reductionproject activity in a developing country where the cost of GHGreduction project activities is usually much lower.



JOINT IMPLEMENTATION (JI)

JI is designed for use in Annex I countries with cappedGHG emissions, unlike CDM, which is tailored to beused in non-Annex I countries bearing no obligations interms of GHG limitation and reduction.

JI allows a country with an emission reduction orlimitation commitment under the Kyoto Protocol (AnnexB Party) to earn emission reduction units (ERUs) froman emission-reduction or emission removal project in

another Annex B Party, each equivalent to one tonne ofCO2, which can be counted towards meeting its Kyototarget.

Offers Parties a flexible and cost-efficient means of

fulfilling a part of their Kyoto commitments, while the



ANNEX I TRADING

With this mechanism, the countries in Annex I will be able totrade their permits, and this enables many countries like theU.S. to meet their targets

The purpose of the Annex I trading is that it helps a country

for some of its additional permits to reduce its complianceburden by paying another country

Trading also encourages countries to invest in research anddevelopment, and to adopt new technology.

Governments and private sectors both play important roles in

trading. Thus the units which may be transferred under the scheme,

each equal to one tonne of CO2, may be in the form of:assigned amount unit (AAU), removal unit (RMU),emission reduction unit (ERU), certified emission

reduction (CER).



TYPES OF CARBON CREDITS

Assigned Amount Unit (AAU): Issued by an Annex I Party onthe basis of its assigned amount pursuant to Articles of the Protocol.

Removal Unit (RMU): On the basis of land use, land-usechange and forestry (LULUCF) activities such as reforestation.

Emission Reduction Unit (ERU): Generated by a jointimplementation project.

Certified Emission Reduction (CER): Generated from aclean development mechanism project activity.











ETHICAL & ECONOMIC ISSUES

The Kyoto Protocol has many flaws because it wasnegotiated in great haste.

Each industrialized nation was required to cap itsemissions at specific target levels applying to the periodof 2008 – 2012.

Only a few nations will be able to meet their strict targetsunless they are allowed emissions trading.

Meeting the target for USA without emissions tradingwould cost over $1,000 per household per year.

Meeting the target for USA with emissions trading wouldcost around $100 per household per year.



ISSUES WITH INITIAL ALLOCATION

Initial allocation of trading permits (worth over $2 billion)is a key issue in emissions trading.

Conflict of interest between industrialized anddeveloping countries.

The industrialized countries want the permits allocatedaccording to the status quo, to get more permits.

Developing countries want to overturn the status quo.

Kyoto targets will bring a huge windfall to countries likeRussia, Ukraine where emissions in 2008 would belower than 1990 levels.



ISSUES WITH NEW SIGNATORIES

The Kyoto target applies only to 38 industrialized andreforming countries.

Developing countries have no obligation to control theiremissions.

USA which has not signed the protocol, argues that it isnot fair to exclude countries like China and India fromthe obligation.

Developing countries like China and India refuse toaccept any limits on emission arguing for voluntarylimits.





LEAKAGES

Carbon trading raise serious questions about whethercarbon reduced by a project at one location will result inactual reductions in emissions.

Forests, bio-sequestration projects that sequestercarbon in particular often create leakage challenges.

Industrial projects can create leakage problems if theindustry gets credit for reducing carbon at one industrialplant while moving the carbon producing activities toanother place.



ISSUES IN MEASURING CARBON

FOOTPRINT

No clear detailed standards.

GHG widely quoted, but does not contain

sufficient detail and parameters are mainly USbased.

Due to widely spread outsourcing, difficult toobtain true emission levels.

Carriers have no incentive to share their fuelbills.



RELATION WITH OIL PRICES

When oil prices go up, energy producers rely more oncoal, which emits higher levels of CO2, and thisincreases demand for carbon credits.

Countries which are primarily dependent on imports tomeet their oil requirements are severely affected by this.

As oil prices rise, coal consumption goes up, making itdifficult to meet emission targets & high demands ofcarbon credits puts additional pressure.



ANALYSIS ON ETHICS THEORIES

UtilitarianismUtilitarianism states that the end of any act should be tomaximize utility across the general population

Benefits of Carbon Trading

―Would allow developed countries to meet their demandedtarget

―Developing economies would receive much neededcapital and technology inflow from developed economies

Rights and Duties Allocating Global Commons Resources as PropertyRights―Atmosphere is a global commons

―

Trading permits gives emitters of GHGs a property rightto emit at a level consistent with their allocation




Justice & Fairness

Distributive Justice

― Diminishing cheap projects in developing

countries― Diminishing Official DevelopmentAssistance(ODA)

―

Internal allocation of government-wide cap― Distributive justice and revenue fromallowances




Justice & Fairness (Contd.)

Compensatory Justice

― Absence of strict compliance and enforcement laws

― Questions: Nature and extent of penalty, who should bethe beneficiaries and how benefits would bedistributed?

Procedural Justice

― Technical ability to participate in cap and trade regimes― All Stakeholders participation in decision makingprocess

Ethics of Care

― Allowing Delay In Investing In New Technology



CONCLUSIONS &RECOMMENDATIONS

Current methods and allocations adopted inhaste, hence insufficient.

More extensive and inclusive research requiredon the subject.

Carbon Tax against Carbon Trading.

Right to emit under the trading regime should betemporary.

Adequate representation for all sections. Mixed proposal- allocation based on per capita

considerations, status quo and historicalresponsibilities.



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