The document discusses greenhouse gases like carbon dioxide and their impact on global warming. It explains that carbon credits were created through agreements like the Kyoto Protocol to limit greenhouse gas emissions from countries and allow for carbon trading. Under the Kyoto Protocol, countries agreed to emission caps and could buy carbon credits from other countries or companies that had excess allowances to emit greenhouse gases. The flexibility mechanisms in Kyoto, like the clean development mechanism, aimed to reduce emissions on an international scale through carbon trading.

2. INTRODUCTION
Greenhouse Gases: Carbon dioxide (CO2)
The main source of CO2 emissions is the
burning of fossil fuels:
heating
power generation
transportation
Deforestation
CO2 has the largest impact on the greenhouse effect.
There are Six Green House Gases:
(Carbon Dioxide, Methane, Nitrous Oxide, Hydro-Fluoro-
Carbons, Per-Fluoro-Carbons and Sulphur-Hexa-Floride) .
The gases increase the atmosphere's ability to trap infrared
energy and thus affect the climate

3. What is Carbon credit ?
Carbon credits are a key component of national
and international emissions trading that have been
implemented schemes to mitigate global warming
The concept of carbon credits came into existence
as a result of increasing awareness of the need for
controlling emissions.
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 .

4. The greenhouse mitigation project generate
credits and these credits can be exchanged
between businesses or bought and sold in
international markets at the prevailing market
price .
The protocol followed with respect to carbon
trading was KYOTO PROTOCOL.

5. Kyoto protocol
Protocol to the international Framework Convention
on Climate Change with the objective of reducing
Greenhouse gases that cause climate change.
It was agreed on 11 December 1997 at the 3rd
Conference of the Parties to the treaty when they
met in Kyoto in Japan.
Came into force on February 16, 2005

6. OBJECTIVE
Kyoto is intended to cut global emissions of
greenhouse gases.
The objective is to achieve "stabilization of
greenhouse gas concentrations in the atmosphere at
a level that would prevent dangerous anthropogenic
interference with the climate system."

7. Emission Allowances:
The Protocol agreed 'caps' or quotas on the
maximum amount of Greenhouse gases for
developed and developing countries, listed in its
Annex I .
Operators- local business and other organizations.
Each operator has an allowance of credits, where
each unit gives the owner the right to emit one metric
tonne of carbon dioxide or other equivalent
greenhouse gas

8. Unused allowances are sold as carbon credits.
while businesses that are about to exceed their
quotas can buy the extra allowances as
credits, privately or on the open market
National 'registries‘ managed – to validate and
monitor for compliance by the UNFCCC.

9. Kyoto's 'Flexible mechanisms'
A credit can be an emissions allowance which was
originally allocated or auctioned by the national
administrators of a cap-and-trade program
mitigating activities can occur in any developing
country which has ratified the Kyoto Protocol, and
has a national agreement in place to validate its
carbon project through one of the UNFCCC's
approved mechanisms.

10. Once approved, these units are termed Certified
Emission Reductions, or CERs. The Protocol allows
these projects to be constructed and credited in
advance of the Kyoto trading period.
The Kyoto Protocol provides for three mechanisms
- Joint Implementation
- Clean Development Mechanism
- Emissions Trading

11. Emissions Market
These allowances either can be sold privately or in
the international market at the prevailing market
price.
UNFCCC – It validates each international transfer.
Carbon prices are normally quoted in Euros per
tonne of carbon dioxide .
The Chicago Climate Exchange, European
Climate Exchange, Nord Pool, and PowerNext.
Currently are four exchanges.

12. How buying Carbon credit can
reduce emissions?
It creates a market-by giving a monetary
value to the cost of polluting air.
Emissions become an internal cost of doing
business
Example

13. Setting a market price for carbon
 Unchecked energy use and emission levels
are predicted to keep rising
 Rule of supply and demand will push up the
market price
• Encourage more groups to undertake
environmentally friendly activites

14. India’s Role
India signed and ratified the Protocol in
August, 2002.
India has generated 30 million carbon
credits, the second highest transaction
volumes in the world.

15. Criticism
The Kyoto trading period only applies for five
years between 2008 and 2012.
As several countries responsible for a large
proportion of global emissions (notably
USA, Australia, China and India) have avoided
mandatory caps.
 Concerns raised over the validation of CDM
credits.