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CARBON CREDIT & CARBON TRADING

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One carbon credit is equal to one metric tonne of carbon dioxide. .CARBON CREDIT     Carbon credits and carbon markets are a component of national and international attempts to mitigate the growth in concentrations of greenhouse gases (GHGs). carbon dioxide equivalent gases(CH 4 .) The plan works by capping the amount of total emissions that can be released by one company or business. N 2 O. The mechanism was formalized in the Kyoto Protocol. an international agreement between more than 170 countries in 1997. United Nations Framework Convention on 5 Climate Change (UNFCC) is the central agency. or in some markets. O 3 etc.

product or person 6 . event.  A carbon footprint has historically been defined as "the total set of greenhouse gas (GHG) emissions caused by an organization.  However.CARBON CREDIT  If there is a shortfall in the amount of gases that are used. they also are bought and sold in international markets at whatever the determined market value for them is. These credits are often traded between businesses. there is a monetary value assigned to this shortfall and it may be traded.

Annexure countries) 7 .CARBON CREDIT  There are two types of market in carbon credit: 1. Voluntary Market (Non. Compliance Market (Annexure I countries) 2.

 There are two kinds of carbon trading – Emission trading and trading in Project-based Credits. which can be traded or exchanged in market. Each carbon credit is equal to 100 metric tons of carbon dioxide. The two categories are put together as Hybrid trading System 8 .CARBON TRADING  A carbon trading system allows the development of a market through which carbon dioxide or carbon equivalents can be traded between participants. whether countries or companies.

a company with higher expenditure for reduction of its emissions buys the required allowance from other company to save its emission cost 2. EMISSION TRADING:  A company can reduce its emission by half the cost of allowance bought from other company  On the other hand.TYPES OF CARBON TRADING 1. PROJECT-BASED TRADING:  Government & World Bank subsidized credit for projectbased trading to the companies calculating how much carbon dioxide equivalent they save/reduces  Project-based Credit trading includes ‘baseline-and-credit’ trading and ‘offset’ trading 9 .

both emission trading and offset trading are used and try to make allowance exchangeable for project-based credits. HYBRID TRADING SYSTEM:  In Hybrid trading system.  Hybrid trading system is enormously complex as it is not only difficult to try to create credible ‘credit’ and make them equivalent to ‘allowance’ 10 .TYPES OF CARBON TRADING 3.

 The Multi Commodity Exchange of India Ltd entered into an alliance with the Chicago Climate Exchange in 2005 to introduce carbon credit trading in India  India is considered as the largest beneficiary. claiming about 31 % of the total world carbon trade through CDM 11 .POSITION OF INDIA  India is one of the exempted from KYOTO protocol as they are stated as developing countries. but overseas companies can buy carbon credits from these countries.

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