Carbon Markets

Carbon trading refers to a commercialised activity that originates from protecting the earth from harmful emission of gases from industries. Against this background the concept of carbon credits came into existence as a result of increasing awareness of the need for controlling emissions. Carbon credits refer to a certified carbon dioxide emission displacement credit, equal to one tonne of CO2 removed from the environment.
On the basis of efforts of the United Nations Organisation, primarily as an off-shoot of environmental needs, the Kyoto conference was organised which defined the Kyoto mechanism by putting the responsibility on the industrialised nations to reduce greenhouse gas (GHG) emissions.181 nations have ratified the treaty till date.
The Kyoto mechanism defines three broad mechanisms as Emissions trading – known as the carbon market ,Clean Development Mechanism (CDM) and Joint Implementation (JI) and also allows flexibility .As a result of the same Carbon Market has emerged where financial institutions have entered as carbon aggregators and built a base for origination of carbon assets globally. An increasing number of carbon contracts and carbon-based derivatives are becoming available. Specialized companies and institutions have sprung up to service several aspects of the carbon value chain Some financial products being rolled out include the following which is adding depth to the market. such as monetization of future carbon receivables, carbon delivery guarantees, derivatives, carbon-linked bond transactions etc.
The   growth of carbon market   during last few years has been spectacular.   In fact   currently the   emerging carbon market has been   valued at US$64 billion (€47 billion) in 2007. Its biggest success so far has been to send market signals for the price of mitigating carbon emissions. This, in turn, has stimulated innovation and carbon abatement worldwide, as motivated individuals, communities, companies and governments have cooperated...