How Green is your MBA?

Careers in Carbon Finance and Related Areas

Kavita Krishnamurthy Madiyal

What are GHGs?
Greenhouse Gases are components in the atmosphere contributing to the greenhouse effect, that is imperative to habitation on earth. Greenhouse gases include, in order of relative abundance: carbon dioxide, methane, nitrous oxide, and ozone.

What is CDM?
CDM is an acronym for Clean Development Mechanism that allows net global greenhouse gas emissions to be reduced at a much lower global cost; this is done through financing of emissions-reduction projects in developing countries where costs are lower than in industrialized countries.
Under the Clean Development Mechanism, developing countries must adopt newer technologies that emit smaller quantities of gases to save energy. Only a portion of the carbon credits earned thus can be transferred to companies in developed countries under CDM at a price. There is also a fixed amount of credit that can be bought by countries in Europe.

What is Kyoto Protocol?
With global economies growing over the years, there has also been a parallel increase in noxious gases emitted by human industry, resulting in global warming. Many countries realized this some years ago and came together to sign an agreement called the Kyoto Protocol to reduce the release of Green House Gases (GHGs). Under the Kyoto Protocol, most developed countries have agreed to bring down their carbon emission levels in the period 2008 to 2012. 

What are CERs?
An industrialised country that wishes to get credits from a CDM project must obtain the consent of the developing country hosting the project that will contribute to sustainable development. Then, using methodologies approved by the CDM Executive Board (EB), the applicant (the industrialised country) must make the case that the carbon project would not have happened anyway (establishing additionality), and must establish a baseline estimating the future emissions in absence of the registered project. The EB then decides whether or not to register (approve) the project. If a project is registered and implemented, the EB issues credits, called Certified Emission Reductions.

What is Carbon Credits?
Carbon credits are a key component of national and international emissions trading schemes that have been implemented to mitigate global warming. A country has two ways to reduce emissions. It can reduce GHG by using new technology that is within the norms of emission releases. Or it can help a developing country that is part of the Kyoto Protocol set up new technology that reduces emissions, thereby earning ‘credits’ for itself.

What is Emission trading/ Cap and Trade?
A central authority (usually a government or international body) sets a limit or cap on the amount of a pollutant that can be emitted. The total amount of allowances and credits cannot exceed the cap, limiting total emissions to that level. Companies that need to increase their emissions must buy credits from those who pollute less. The transfer of allowances is referred to as a trade.