business ethics group 4 project_final

8/6/2019 Business Ethics Group 4 PROJECT_Final

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ETHICAL ISSUES IN CARBON TRADINGETHICAL 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))


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AGENDA

Introduction

Kyoto Protocol & Implications

Ethical & Economic Issues

Analysis on various theories

Conclusion


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CLIMATE CHANGE ACTIVISM

A short history of the Framework Convention of climate change.

1979 First World Climate Conference.

1987 Montreal Protocol signed.

1988 The Intergovernmental Panel on Climate Change(IPCC) established.1990 Second World Climate conference.

1992 Framework Convention on Climate change (FCCC) signed at the UN

Conference in Rio.

1995 The First session of the conference of the parties to the FCCC in Berlin.

1996 The second session of the Conference of parties(COP2) in Geneva.

1997 The third session of the Conference of parties(COP3) in Kyoto.

Kyoto protocol signed.


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INTRODUCTION

One of the most controversial global issues discussed today is

whether or not to put forth the effort to slow global warming

Carbon dioxide concentrations in the atmosphere are the

highest in 160,000 years; the levels of atmospheric methane, apowerful greenhouse gas, has risen 145% in the last 100

years.

When fossil fuels and wood are burnt they release greenhouse

gases that occur naturally in the atmosphere, making the

average temperature around 15C. Without this protective

blanket our world would be a much colder -18C


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GLOBAL WARMING & KYOTO PROTOCOL

Global warming is when the earth heats up (the temperature rises). Ithappens when greenhouse gases (carbon dioxide, water vapor, nitrousoxide, and methane) trap heat and light from the sun in the earthsatmosphere, which increases the temperature.

Kyoto Protocolto the United Nations Framework Convention on climatechange (UNFCCC), aimed at fighting global warming.

Initially adopted on 11 December 1997 in Kyoto, Japan and entered intoforce on 16 February 2005

191 states have signed and ratified the protocol.

Annex I countries agreed to reduce their collective greenhouse gasemissions by 5.2% from the 1990 level

The Protocol allows for several "flexible mechanisms", such as emissionstrading, the clean development mechanism (CDM) and joint implementation


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CARBON CREDITS

Carbon credits are a key component of national and

international emissions trading schemes that have been

implemented to mitigate global warming

Carbon credits are certificates issued to countries that reducetheir 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 CO2 reduced.

For each ton of CO2 emission avoided, an entity would get a

CER which could be sold through a futures market to

commercial and individual customers interested in reducing

their carbon footprint.


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Contd.

Annex- I countries have to reduce pollution levels

pre- 1990 era or trade carbon countries with

developing nations or invest in conservation.

No immediate restrictions for Non Annex countries.

Serves three purposes:-

Avoids restrictions on growth.

Cannot buy carbon credits from industrialized nations. Transfer of money and technologies to developing

nations.


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FLEXIBLEMECHANISMS

JI

CDM

ANNEX- I

TRADING


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CLEAN DEVELOPMENT MECHANISM (CDM)

The Clean Development Mechanism (CDM) allows industrialized countrieswith a greenhouse gas reduction commitment to invest in emission reducing

projects in developing countries as an alternative to what is generallyconsidered more costly emission reductions in their own countries

A developed country can take up a greenhouse gas reduction projectactivity in a developing country where the cost of GHG reduction project

activities is usually much lower.


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JOINT IMPLEMENTATION (JI)

JI is designed for use in Annex I countries with capped GHG

emissions, unlike CDM, which is tailored to be used in non-

Annex I countries bearing no obligations in terms of GHG

limitation and reduction.

JI allows a country with an emission reduction or limitation

commitment under the Kyoto Protocol (Annex B Party) to earn

emission reduction units (ERUs) from an emission-reduction or

emission removal project in another Annex B Party, each

equivalent to one tonne of CO2, which can be counted towardsmeeting its Kyoto target.

Offers Parties a flexible and cost-efficient means of fulfilling a

part of their Kyoto commitments, while the host Party benefits

from foreign investment and technology transfer


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ANNEX I TRADING

With this mechanism, the countries in Annex I will be able to trade

their permits, and this enables many countries like the U.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 compliance burden by paying

another country

Trading also encourages countries to invest in research and

development, and to adopt new technology.

Governments and private sectors both play important roles intrading.


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TYPES OF CARBON CREDITS

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

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

Emission Reduction Unit (ERU): Generated by a joint implementationproject.

Certified Emission Reduction (CER): Generated from a cleandevelopment mechanism project activity.


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ETHICAL & ECONOMIC ISSUES

The Kyoto Protocol has many flaws because it was negotiated

in great haste.

Each industrialized nation was required to cap its emissions at

specific target levels applying to the period of 2008 2012. Only a few nations will be able to meet their strict targets

unless they are allowed emissions trading.

Meeting the target for USA without emissions trading would

cost over $1,000 per household per year. Meeting the target for USA with emissions trading would cost

around $100 per household per year.


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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 and developing

countries. The industrialized countries want the permits allocated

according 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 like Russia,Ukraine where emissions in 2008 would be lower than 1990

levels.


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ISSUES WITH NEW SIGNATORIES

The Kyoto target applies only to 38 industrialized and

reforming countries.

Developing countries have no obligation to control theiremissions.

USA which has not signed the protocol, argues that it is not fair

to exclude countries like China and India from the obligation.

Developing countries like China and India refuse to accept anylimits on emission arguing for voluntary limits.


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ISSUES IN COMPLIANCE & ENFORCEMENT

The Kyoto Protocol is a multilateral, international agreement &

hence very difficult to enforce.

No serious penalty exists for the violators. Countries that try their best to achieve their targets but do not

meet the required target would be punished according to the

compliance model.

Also, if the enforcers begin to pardon countries that claim thattheir violation was inevitable, non-compliers will always claim

circumstances beyond their control.


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LEAKAGES

Carbon trading raise serious questions about whether carbon

reduced by a project at one location will result in actual

reductions in emissions. Forests, bio-sequestration projects that sequester carbon in

particular often create leakage challenges.

Industrial projects can create leakage problems if the industry

gets credit for reducing carbon at one industrial plant whilemoving the carbon producing activities to another place.


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ISSUES IN MEASURING CARBON

FOOTPRINT

No clear detailed standards.

GHG widely quoted, but does not contain sufficient

detail and parameters are mainly US based.

Due to widely spread outsourcing, difficult to obtain

true emission levels.

Carriers have no incentive to share their fuel bills.


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RELATION WITH OIL PRICES

When oil prices go up, energy producers rely more on coal,

which emits higher levels of CO2, and this increases demand

for carbon credits. Countries which are primarily dependent on imports to meet

their oil requirements are severely affected by this.

As oil prices rise, coal consumption goes up, making it difficult

to meet emission targets & high demands of carbon creditsputs additional pressure.


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ANALYSIS ON ETHICS THEORIES

Utilitarianism

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

Benefits of Carbon TradingWould allow developed countries to meet their demanded

target

Developing economies would receive much needed capital andtechnology inflow from developed economies

Rights and Duties

Allocating Global Commons Resources as Property Rights

Atmosphere is a global commons

Trading permits gives emitters of GHGs a property right to emitat a level consistent with their allocation


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Justice & Fairness

Distributive Justice

Diminishing cheap projects in developing countries

Diminishing Official Development Assistance(ODA)

Internal allocation of government-wide cap

Distributive justice and revenue from allowances


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Justice & Fairness (Contd.)

Compensatory Justice

Absence of strict compliance and enforcement laws

Questions: Nature and extent of penalty, who should be thebeneficiaries and how benefits would be distributed?

Procedural Justice

Technical ability to participate in cap and trade regimes

All Stakeholders participation in decision making process

Ethics of Care

Allowing Delay In Investing In New Technology


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THANK YOU

business ethics group 4 project_final

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