Carbon Trading:Global Market vs. Indian Market

Abstract

Greenhouse gases are major pollutants of environment and its reduction has become a strategic issue world over. Among the various approaches to their reduction, the commercial strategy of issuing of CERs and their trading-as finalied in the Kyoto Protocol-has added another dimension to the financial market mechanisms. Since 2000, as a financial product, the emission trading has started in a big way. By 2008, $119 billion worth of trading had taken place in voluntary and regulatory markets. However, the size of the latter is much bigger. Among the trading platforms EU ETS has emerged as the largest trading platform for carbon credit trading. In India, CERs are generated through the CDM mechanisms and its world position stands only next to China. Considering the low level of pollutions India has a vast potential of generating CERs and reaping benefits out of its trading. Though trading has recently started through MCX; the poor awareness among the industries, lack of development of efficient trading mechanisms and its related infrastructures, and dearth of proper consultancy service are some of the hudrles in the development of the carbon market in India.