Carbon credits are certificates issued to Countries that reduce their emission of Greenhouse Gases (GHG) which cause Global Warming. It is like a Permit that allows an entity to emit a specified amount of greenhouse gases.

Carbon credits are a key component of national and international emissions trading schemes that have been implemented to mitigate global warming. They provide a way to reduce greenhouse effect emissions on an industrial scale by capping total annual emissions and letting the market assign a monetary value to any shortfall through trading.

Credits can be exchanged between businesses or bought and sold in international markets at the prevailing market price. Credits can be used to finance carbon reduction schemes between trading partners and around the world.

Opportunities exist for Chartered Accountants in the following areas

An example will best illustrate how the Carbon Credit Market works. Example -  British Petroleum in UK emitting more than the accepted norms of UNFCCC can tie up with Subsidiary in India or China under Clean Development Mechanism of Kyoto Protocol. The credits arising out of the use of the new technology are sold to counterparts in Europe to meet their emission targets under the Kyoto Protocol. Thus a carbon credit market is created.

1. Conceptualizing the project
2. Drafting Project Concept Note
3. Quantification of GHG Carbon Footprint
4. Selection of Cleaner technologies for New projects
5. Project risk analysis
6. Making Project/ Project Design Document
7. Legal and regulatory advice during negotiations with host country Designated National Authority (DNA)
8. Advice on the appointment of independent validators
9. Assistance to achieve registration of the project by the CDM Executive Board
10. Ensuring  Compliances
11. Tax structuring and optimization
12. Carbon Finance
13. Advise to Central and State Government on National Action Plan implementation
14. Energy Audit under The Energy Conservation Act 2001
15. Advise to investors about investment in carbon credit
16. Accounting advisory services
17. Taxation advisory services

Useful References

1. United Nations Framework Convention on Climate Change  

http://unfccc.int/2860.php -

2. CDM India-Designated National Authority

 http://cdmindia.nic.in/

3. Ministry of Environment & Forests (MoEF)

http://www.envfor.nic.in/

4. Ministry of Power-

http://www.powermin.nic.in/

5. Ministry of New and Renewable Energy

http://mnes.nic.in/

6.  Ministry of Commerce & Industry

 http://commerce.nic.in/

7.  Bureau of Energy Efficiency

http://www.bee-india.nic.in/

8. International Emissions Trading Association(IETA)-

http://www.ieta.org/ieta/www/pages/index.php