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India, China and some other Asian countries have the advantage because they are developing countries.

Any company, factories or farm owner in India can get linked to United Nations Framework Convention on Climate Change and know the 'standard' level of carbon emission allowed for its outfit or activity. The extent to which I am emitting less carbon (as per standard fixed by UNFCCC) I get credited in a developing country. This is called carbon credit. These credits are bought over by the companies of developed countries mostly Europeans -- because the United States has not signed the Kyoto Protocol. To summarize, 1. Carbon credits are an element used to aid in regulation of the amount of gases that are being released into the air. This is part of a larger international plan which has been created in an effort to reduce global warming and its effects. 2. The plan works by capping the amount of total emissions that can be released by one company or business. 3. If there is a shortfall in the amount of gases that are used, there is a monetary value assigned to this shortfall and it may be traded. These credits are often traded between businesses. 4. However, they also are bought and sold in international markets at whatever the determined market value for them is. 5. There are also times when these credits are used to fund carbon reduction plans between trading partners. HOW DOES IT WORK IN REALLIFE ?? Assume that British Petroleum is running a plant in the United Kingdom. Say, that it is emitting more gases than the accepted norms of the UNFCCC. It can tie up with its own subsidiary in, say, India or China under the Clean Development Mechanism. It can buy the 'carbon credit' by making Indian or Chinese plant more eco-savvy with the help of technology transfer. Or it can tie up with any other company like Indian Oil, or anybody else, in the open market. In December 2008, an audit will be done of their efforts to reduce gases and their actual level of emission. China and India are ensuring that new

technologies for energy savings are adopted so that they become entitled for more carbon credits. They are selling their credits to their counterparts in Europe. This is how a market for carbon credit is created. Every year European companies are required to meet certain norms, beginning 2008. By 2012, they will achieve the required standard of carbon emission. So, in the coming five years there will be a lot of carbon credit deals. UNTAPPED INDIAN MARKET : Although India is the second largest generator of environment-friendly projects, domestic firms, public and private, are shying away from maximising the monetary benefits derived from such carbon emission reductions. The country, which is second only to China in terms of generating of carbon credits through the introduction of low polluting technologies, ranks very low when it comes to encashing of these credits through carbon trading. Over 90 per cent of such credits generated are being held back by Indian firms, amid growing uncertainties in the global carbon trade market. As a result, there is a great opportunity awaiting India in carbon credit trading which is estimated to go up to $100 billion by 2010. In the new regime, the country could emerge as one of the largest beneficiaries accounting for 25 percent of the total world carbon trade, says a recent World Bank report. The countrys dominance in carbon trading is expected to be driven, not so much by the domestic industry, but more by its huge tracts of plantation land, estimated to be over 15 million hectares, much larger than Australia which aims to be a major player in emission trading by adding 2 million hectare plantation by 2020. MARKETS FOR CARBON CREDITS: Emerging carbon credit markets offer enormous opportunities for the upcoming manufacturing/public utility projects to employ a range of energy saving devices or any other mechanisms or technology to reduce GHG emissions and earn carbon credits to be sold at a price. The carbon credits can be either generated by project participants who acquire carbon credits through implementation of CDM in Non annexure I countries or through Joint Implementation (JI) in Annexure I countries or

supplied into the market by those who got surplus allowances with them. The buyers of carbon credits are principally from Annexure I countries. They are: Especially European nations, as currently European Union Emission Trading Scheme (EU ETS) is the most active market; Other markets include Japan, Canada, New Zealand, etc The major sources of supply are Non-Annexure I countries such as India, China, and Brazil. Emission trading is a mechanism that enables countries with legally binding emissions targets to buy and sell emissions allowances among themselves. Currently, futures contracts in carbon credits are actively traded in the European exchanges. In fact, many companies actively participate in the futures market to manage the price risks associated with trading in carbon credits and other related risks such as project risk, policy risk, etc. Keeping in view the various risks associated with carbon credits, trading in futures contracts in carbon allowances has now become a reality in Europe with burgeoning volumes. Currently, project participants, public utilities, manufacturing entities, brokers, banks, and others actively participate in futures trading in environment-related instruments. The European Climate Exchange, a subsidiary of Chicago Climate Exchange, remains the leading exchange trading in European environmental instruments that are listed on the Intercontinental Exchange, previously known as International Petroleum Exchange. Carbon Credit Trading is a process whereby organizations purchases carbon credits to neutralize their Carbon Dioxide impact on global warming. The two types of markets for carbon credits are: a) COMPLIANCE MARKET: Compliance markets have set up cap and trade system whereby the total annual emissions for an industry or country are capped by law or agreement, and carbon credits can be traded between businesses or sold in trading markets. Those producers who exceed their emission reductions can trade their credit to others in marketplace

who have not reached their emission goals. This market is specifically for the Annex1 countries. The compliance markets are mainly a result of the Kyoto Protocol, a cap and trade system that resulted from the international framework Convention on Climate Change. The Kyoto Protocol created specific rules for registering and certifying carbon credits. Carbon credit markets have been developing for several years, especially in Europe. b) VOLUNTARY MARKET: Voluntary markets exist for businesses or individuals to lower their carbon footprint by voluntarily purchasing carbon credits from an investment fund or company that has aggregated credits from individual projects that reduce emissions. The number of voluntary markets has been increasing. This market is helping both the companies in Annex 1 and Non Annex 1 countries. Interest in reducing GHG emissions is increasing worldwide, and this has led to attempts to create new markets for carbon credits. The potential for having cap and trade programs in various states or potentially for the entire United States under an agreement such as the Kyoto Protocol leads to speculation that the price of carbon credits could increase substantially.

KYOTO PROTOCOL: In December 1997, the Third Conference of Parties (COP) to the United Nations Framework Convention on Climate Change (UNFCCC) adopted the Kyoto Protocol. The protocol requires developed countries to limit their Greenhouse Gas (GHG)

emissions to individual targets, resulting in on an average 5.2% reduction in the GHG emission from their 1990 emission levels, in the commitment period 2008-13. The protocol for the first time in evolving climate change regime, provided for legally binding emission commitments by annex1 parties. The protocol covers six main Greenhouse gases CO2, CH4, N2O, Hydro-florocarbons, Perflorocarbons and Sulphur Hexafluoride. The protocol provided three Co-Operative Implementation Mechanisms (CIMs) to enhance flexibility and to facilitate development of cost effective means of achieving the targets. These mechanisms are Joint Implementation and Emission Trading, both of which are co-operative mechanisms applicable to Developed Countries (Annex 1 countries) only. Clean Development Mechanism (CDMs) provides for co-operation betweenAnnex 1 (developed) countries and Non annex1 (developing) countries. INDIA AND KYOTO PROTOCOL: India signed and ratified the Protocol in August, 2002. Since India is exempted from the framework of the treaty, it is expected to gain from the protocol in terms of transfer of technology and related foreign investments. At the G8 meeting in June 2005, Indian Prime Minister Manmohan Singh pointed out that the per-capita emission rates of the developing countries are a tiny fraction of those in the developed world. Following the principle of common but differentiated responsibility, India maintains that the major responsibility of curbing emission rests with the developed countries, which have accumulated emissions over long period of time. However, the U.S. and other Western Nations assert that India, along with China, will account for most of the emissions in the coming decades, owing to their rapid industrialization and economic growth. KYOTOS FLEXIBLE MECHANISM : The Kyoto Protocol provides for three mechanisms that enable countries or operators in developed countries to acquire greenhouse gas reduction credits. Under Joint Implementation (JI), a developed country with relatively high costs of domestic greenhouse reduction would set up a project in another developed

country. Under the Clean Development Mechanism (CDM), a developed country can 'sponsor' a greenhouse gas reduction project in a developing country where the cost of greenhouse gas reduction project activities is usually much lower, but the atmospheric effect is globally equivalent. The developed country would be given credits for meeting its emission reduction targets, while the developing country would receive the capital investment and clean technology or beneficial change in land use. Under International Emissions Trading (IET),countries can trade in the international carbon credit market to cover their shortfall in allowances. Countries with surplus credits can sell them to countries with capped emission commitments under the Kyoto Protocol. These carbon projects can be created by a national government or by an operator within the country. In reality, most of the transactions are not performed by national governments directly, but by operators who have been set quotas by their country. CLEAN DEVELOPMENT MECHANISMS (CDM) : CDMs are of particular interest to developing countries, as it provides for investment in projects in developing countries for their sustainable development, while generating GHG abatements that may be transferred to the annex 1 countries towards meeting their targets under Kyoto Protocol. The operational mechanism of CDMs involves an investment by a legal entity from an Annex 1 country in a project in Non Annex 1 country, which results in emission reductions. The investment decision would include an agreement between the two parties and their respective countries on the dispensation and transfer of the emission reductions resulting from the project. These emission reductions have to be certified by an appropriate authority (the CDM Executive Board, provided for under the protocol) and then these Certified Emission Reductions (CERs, commonly known as carbon credits) can be used to meet Annex1 commitments under Kyoto Protocol. A project activity will be eligible for consideration as a CDM project if it is aligned with the national needs and priorities and contributes to the sustainable development of the host country. Further, the projects must fulfill the following criteria.

(i) Voluntary participation by each party involved i.e it is not driven by any regulatory compliance requirement; (ii)Real measurable and long-term benefits related to mitigation of climate change effects. (iii) Reduction of emissions that are additional to any that would occur in the absence of the project activity in question i.e. the Sponsor would not have undertaken the project in a business as usual scenario andthat in undertaking the project, the sponsor has overcome barriers that may be related to investment, common practice/prevalence or technology or other barriers. (iv) The activity must ensure access to environmentally sound technology needed by the developing country. Broadly, projects that contribute to credible and sustained reduction in GHG emissions qualify as CDM projects. The following broad categories of projects have been recognized as CDM projects. Renewable Energy Projects (Solar Power, Wind Power, Biomass based power, small hydel etc); Fuel substitution ( e.g. coal to oil to gas to hydrogen in Power Plants, Manufacturing Process Industries, automobiles etc); Energy Efficiency improvement and waste heat utilization projects; Other project activities that reduce anthropogenic emissions by sources; Carbon sequestration projects (Forestry etc.); Management of methane emissions from municipal landfills; Management of methane emissions from agriculture and cattle manure management; and Fuel shift from liquid fuel to CNG/LPG in the transport sector.

EMISSION TRADING : For trading purposes, one allowance or CER is considered equivalent to one metric tonne of CO2 emissions. These allowances can be sold privately or in the international market at the prevailing market price. These trade and settle internationally and hence allow allowances to be transferred between countries. Each international transfer is validated by the UNFCCC. Each transfer of ownership within the European Union is additionally validated by the European Commission. Climate exchanges have been established to provide a spot market in allowances, as well as futures and options market to help discover a market price and maintain liquidity. Carbon prices are normally quoted in Euros per tonne of carbon dioxide or its equivalent (CO2). Other greenhouse gasses can also be traded, but are quoted as standard multiples of carbon dioxide with respect to their global warming potential. These features reduce the quota's financial impact on business, while ensuring that the quotas are met at a national and international level. Currently there are at least four exchanges trading in carbon allowances: the Chicago Climate Exchange, European Climate Exchange, Nord Pool, and PowerNext. Recently, Nord Pool listed a contract to trade offsets generated by a CDM carbon project called Certified Emission Reductions (CERs). Many companies now engage in emissions abatement, offsetting, and sequestration programs to generate credits that can be sold on. Should there be trading of emissions? When a given volume of GHGs has been defined by an international agreement as permissible over a certain period of time, emission allowances become scarce goods. As demand will be higher than supply, allowances will command exchange value This value will basically be determined by the size of supply on the one hand and by the perceived utility of fossil-based combustion (in the case of CO2) on the other. Where the threshold regulating the permissible amount of global emissions is set depends on what kind of risk is politically accepted over what period of time and for whom. The more inclusive the ethical storyline adhered to; the lower will most likely be the level of risk

accepted . And the desire for combustion will, inter alia, depend on the extent to which a society has embarked upon a sustainable development path; the more national income is decoupled from carbon emissions and the more well-being from national income, the less will be the pressure to emit. Trade regimes have been criticized for turning parts of the global commons into saleable pieces of property, i.e. commodities. Indeed, such a conception would clearly contradict ethical narratives that see the atmosphere as common heritage of mankind, as integral to the Earths bio-community, or as Gods creation. Possibly for these reasons, the Indian government has demanded to ensure that the Protocol has not created any asset, commodity or goods for exchange. However, these objections would not hold if one considered the price of emission permits not as a rent yielded by a property, but as a fee to be paid for the temporary right to use the atmospheric commons beyond its sink capacity. In fact, the temporary nature of permits along with the fact that a price tag will be attached not to the use but to the overuse of the commons, suggests interpreting the price for a permit not as a price for acquired property but the price for obtaining a user right. Money gives the right to access, but not to ownership. Following this consideration, a trade in permits takes on a different meaning. It would not be instituted in the first place for identifying the most efficient allocation of abatement investments, but for forming the price of user rights. After all, the market, under conditions of relative symmetry among players, is the most ingenious technology for determining prices. Carbon Taxes: Carbon taxes are simply direct payments to government, based on the carbon content of the fuel being consumed. Given that the primary objective of the abatement policy is to lower carbon dioxide emissions, carbon taxes make sense economically and environmentally because they tax the externality directly. Coal generates the greatest amount of carbon emissions and is therefore taxed in greater proportion than oil and natural gas, which have lower carbon concentrations (Coal contains .03 tonnes of carbon per million Btu of energy, while oil and naturalgas contain only 0.024 & 0.016 tonnes respectively). CARBON TRADING SYSTEM : A carbon trading system allows the development of a market through which carbon (carbon dioxide) or carbon equivalents can be traded between participants, whether countries

or companies. Each carbon credit is equal to one hundred metric tons of carbon dioxide, which can be traded or exchanged in market. TYPES CARBON TRADING: There are two kinds of carbon trading i.e. Emission trading and trading in Projectbased Credits. The two categories are put together as Hybrid trading System. Carbon trading is also called Pollution trading. 1. EMISSION TRADING: A company can reduce its emission by half the cost of allowance bought from other company. On the other hand, a company with higher expenditure for reduction of its emissions buys the required allowance from other company to save its emission cost. In either ways, the company saves half the expenditure they would have to spend for reduction of carbon emissions without carbon trading. Some emissions trading scheme allow companies to save any surplus allowances they have for their own use in future years, rather than selling them. Emission trading is also sometimes call cap-and-trade. 2. TRADING IN PROJECT-BASED CREDITS: Government and World Bank subsidized credit for such project-based trading to the companies, covering part of the cost of building the projects and calculating how much carbon dioxide equivalent they save. Project-based Credit trading includes a baseline-and-credit trading and a offset trading. 3. HYBRID TRADING SYSTEM: In Hybrid trading system, both emission trading and offset trading are used and try to make allowance exchangeable for project-based credits. Hybrid trading system is enormously complex as it is not only difficult to try to create credible a credit and make them equivalent to a allowance. Mixing emission and project-based credit trading also changes the economics. UNDERSTANDING CARBON TRADING: Carbon trading, or more generically emissions trading, is the term applied to the trading of certificates representing various ways in which carbon-related emissions reduction targets might be met. Participants in carbon trading buy and sell contractual

commitments or certificates that represent specified amounts of carbon- related emissions that either: are allowed to be emitted; comprise reductions in emissions (new technology, energy efficiency, renewable energy); or Comprise offsets against emissions, such as carbon sequestration (capture of carbon in biomass). People buy and sell such products because it is the most cost-effective way to achieve an overall reduction in the level of emissions, assuming that transaction costs involved in market participation are kept at reasonable levels. It is cost-effective because the entities that have achieved their own emission reduction target easily will be able to create emission reduction certificates "surplus" to their own requirements. These entities can sell those surpluses to other entities that would incur very high costs by seeking to achieve their emission reduction requirement within their own business. Similarly, sellers of carbon sequestration provide entities with another alternative, namely offsetting their emissions against carbon sequestered in biomass. Emissions trading are one of the flexibility mechanisms allowed under the Kyoto Protocol to enable countries to meet their emissions reduction target. Countries/companies with high internal emission reduction costs would be expected to buy certificates from countries or companies with low internal emission reduction costs. The latter entities would also be expected to maximize their production of low cost emission reduction so as to maximize their ability to sell certificates to high cost entities. The overall outcome is that the emission reduction target is met, but at a much lower cost than would be incurred by requiring each entity to achieve the emission reduction target on their own.

CARBON TRADING MARKET MECHANISM: The simplest type of carbon trade involves an entity preparing a contract that describes and specifies the kind of activity they are undertaking to either reduce or offset emissions. The contract may or may not be independently verified, although doing so will increase

buyer confidence and probably attract a higher price. This contractual commitment is then sold to another entity that wishes to make use of the specified amount of the reduction or offset. Contractual commitments are usually traded "over the counter" (OTC), which means that the trade is usually a bilateral one between a willing buyer and a willing seller without the need for a market to exist. OTC trades are usually single trades where the terms are either partially or fully confidential. OTC markets are relatively simple and operate where there is limited "liquidity" (that is, not many trades are occurring) or where the product being traded is somewhat unique for each trade. In contrast, a carbon trading market is more akin to a share market. Products traded on a market are generally more homogeneous; for example, all types of carbon sequestration that meet the rules defining the creation of a "carbon sequestration certificate" may be deemed to be identical in the market. This both increases the liquidity of the product and helps market participants understand and have more confidence in the product being traded. The existence of a set of enforced rules associated with the creation of both emission reduction and emission offset certificates also increases market confidence in the product. Carbon network or market is a complex structure as seller can sell carbon credits in primary and secondary market and also seller and buyer can have direct or indirect relation with or without help of consultant and intermediaries. But by entry of brokers and consultants in market trading becomes easier as compared to earlier trading platforms. Consultants and brokers have opened many platforms for seller and buyer to have smooth flow of carbon credits. Also consultants help to mitigate different types of risk associated with carbon trading. PARTIES INVOLVED IN CDM PROJECT DEVELOPMENT AND CARBON TRADING: Project entity: The project entity is often a Special Purpose Vehicle such as a joint venture company or a limited partnership set up specifically to undertake the project. Creating a Special Purpose Vehicle may be useful in order to keep a project at arms length from the project sponsors, for legal, tax or financial reasons. Alternatively, the project entity may be an individual, an existing company, a government agency, a charity, and NGO or community organization. A project may also encompass several different entities. In such cases it is critical to have clear contractual arrangements in place specifying

how the different entities are going to work together to implement the project. Sponsor: Sponsors are those individuals, companies or other entities that promote or support a project because they have a direct or indirect interest in the project. Sponsors can include owners of the land on which the project will be situated, contractors, suppliers, buyers of the projects outputs, or other users of the project. Lender: If the project is financed through debt, one or more banks may be involved in providing this. A loan from a group of banks is known as a syndicated loan. Typically one of the banks will take the lead role in arranging the finance and syndication agreements, while another (called the engineering or technical bank) will monitor the technical aspects of the project. Others may be appointed to deal with other specific aspects such as insurance. Other types of lenders may include individuals, corporations, contractors, community groups and institutional investors such as the World Bank and other international agencies. Equity provider: Equity may be provided by project sponsors or third party investors. Equity providers will wish to ensure that the project produces a return on their investment as set out in the business plan or prospectus. Constructor: Construction is usually carried out by specialist contractors who have responsibility for the completion of the works, and often have to assume liability for finishing construction on time and to budget. Lenders will usually require contractors to demonstrate a good track record in completing the same or similar project activities. Operator: Operation of the project may be carried out by the project entity, one of the sponsors, or a third party appointed to be responsible for the operation and maintenance of the project facilities once completed.

Supplier: Various companies will supply goods and services to the project. Lenders will generally prefer supplier agreements and contracts to be in place for the delivery of essentials such as fuel and equipment. Equipment suppliers will generally be required to have a track record of supplying the relevant equipment and to provide equipment performance guarantees. Buyer: A project may produce one or more outputs. Lenders will wish to have contracts in place with buyers of the outputs constituting the majority of the projects future cash flow. The nature of these contracts will be subject to particular scrutiny and the terms of a loan may well be dependent upon factors such as the minimum price level in a contract and how various risks are apportioned between the buyer and the project entity. In order for a lender to place any reliance on a purchase agreement as an indication of a projects ability to repay a loan, the lender will need to be satisfied as to the credit-worthiness of the buyer. Insurer: Insurers can assist in identifying and mitigating risks associated with the project. If a risk is to be mitigated by purchasing insurance, the lender will need to be satisfied as to the track record and credit-worthiness of the insurer. Rating agencies: The rating agencies (e.g. Moodys, Standard& Poors, and Fitch Ratings) may be involved if the financing of the project involves the issue of securities. Experts: Project sponsors and lenders will often call upon external experts to advise them on key technical, engineering, environmental and risk aspects of a project. Experts need to be able to demonstrate a track record of expertise in the relevant area.

Host government: The objectives and role of the host government will vary but may involve economic,

social and environmental guidelines and issuance of relevant consents, permits and licenses. In some countries, the host government may be involved through state owned or controlled companies that may take on any of the above roles in relation to the project. THEADV ANTAGES OF CARBON TRADING: 1. Carbon credit trading can open up a new cash source to companies who are able to maintain their emission levels well within the permissible limits. 2. The overall ecological balance is preserved 3.The company or country gets rewarded for applying clean technology in its production process. 4. A much better corporate and social image which wins public approval 5. Encourages activities like tree plantings which would help reduce soil salinity, improve water quality and enhance biodiversity. KEY RISKSAND UNCERTAINTIES: The key risks & uncertainties associated with carbon trading markets are: 1. The extent to which the Kyoto Protocol guidelines are implemented & followed 2. The attitude of US which is the biggest polluter and had refused to sign the treaty 3. The final rules and decisions relating to an emissions trading market The first Kyoto commitment period, which ends on 31 December 2012, is set to be dominated by the EU ETS and CDM on the market side. The interlinked EU ETS and CDM markets will see the greatest cumulative volume and value, as they are consolidating and getting more sophisticated. In addition, the next five years will see the JI market deliver its first credits and possibly an emerging market in national Kyoto allowances or AAUs. Beyond Kyoto, the ten-state RGGI has already produced the first US compliance trade, and more is expected. INDIAN SCENARIO : INTRODUCTION: The sudden boom in the carbon market has greatly helped Indian industries to cash in on the carbon trading business. India certainly being the preferred location for carbon credit buyers or project investors because of its strategic position in the world today.

India is considered as the largest beneficiary, claiming about 31 per cent of the total world carbon trade through the Clean Development Mechanism (CDM). It is expected to rake in at least Rs 22,500 crore to Rs 45,000 crore over a period of time and Indian companies are expected to corner at least 10 per cent of the global market in the initial year. Carbon Trading has potential of exploring Indian market worth 18000 Cr. Under the Kyoto Protocol, between 2008 and 2012, developed countries have to reduce emissions of greenhouse gases to an average of 5.2 per cent below the 1990 level. They can also buy CERs from developing countries, which do not have any reduction obligations, in case their industries are not in a position to lower the emission levels themselves. One tonne of carbon dioxide reduced through the Clean Development Mechanism (CDM) project, when certified by a designated entity, becomes a tradable CER. Developed countries have to spend nearly $300 to $500 for every tonne reduction in CO2, against $10 to $25 to be spent by developing countries. In developing countries like India, the emission levels are much below the target fixed by the Kyoto Protocol. So, they are excluded from reduction of GHG emission. On the contrary, they are entitled to sell surplus credits to developed countries. The European countries and Japan are the major buyers of carbon credits. The UNFCCC divides countries into two main groups: A total of 41 industrialized countries are currently listed in the Conventions Annex-I, including the relatively wealthy industrialized countries that were members of the Organization for Economic Co-operation and Development (OECD) in 1992, plus countries with economies in transition (EITs), including the Russian Federation, the Baltic States, and several Central and Eastern European States. The OECD members of Annex-I (not the EITs) are also listed in the Conventions Annex-II. There are currently 24 such Annex-II Parties. All other countries not listed in the Conventions Annexes, mostly the developing countries, are known as non-Annex-I countries. They currently number145. Annex I countries such as United States of America, United Kingdom, Japan, New Zealand, Canada, Australia, Austria, Spain, France, Germany etc. agree to reduce their emissions (particularly carbon dioxide) to target levels below their 1990 emissions levels. If they cannot do so, they must buy emission credits from developing countries or invest in conservation. Developing countries (non-Annex I) such as India, Srilanka, Afghanistan, China, Brazil, Iran, Kenya, Kuwait, Malaysia, Pakistan, Phillippines, Saudi Arabia, Sigapore, South Africa, UAE etc have no immediate restrictions under the UNFCCC.

This serves three purposes: a) Avoids restrictions on growth because pollution is strongly linked to industrial growth, and developing economies can potentially grow very fast. b) It means that they cannot sell emissions credits to industrialized nations to permit those nations to over-pollute. c) They get money and technologies from the developed countries inAnnex II. India comes under the third category of signatories to UNFCCC. India signed and ratified the Protocol in August, 2002 and has emerged as a world leader in reduction of greenhouse gases by adopting Clean Development Mechanisms (CDMs) in the past few years. According to Report on National Action Plan for operationalizing Clean Development Mechanism (CDM) by Planning Commission, Govt. of India, the total CO2- equivalent emissions in 1990 were 10,01,352 Gg (Giga grams), which was approximately 3% of global emissions. If India can capture a 10 % share of the global CDM market, annual CER revenues to the country could range from US$ 10 million to 300 million (assuming that CDM is used to meet 10-50% of the global demand for GHG emission reduction of roughly 1 billion tonnes CO2, and prices range from US$ 3.5-5.5 per tonne of CO2). As the deadline for meeting the Kyoto Protocol targets draws nearer, prices can be expected to rise, as countries/companies save carbon credits to meet strict targets in the future. India is well ahead in establishing a full-fledged system in operationalising CDM, through the Designated National Authority (DNA). Other than Industries and transportation, the major sources of GHGs emission in India are as follows: Paddy fields Enteric fermentation from cattle and buffaloes Municipal Solid Waste

Of the above three sources the emissions from the paddy fields can be reduced through special

irrigation strategy and appropriate choice of cultivars; whereas enteric fermentation emission can also be reduced through proper feed management. In recent days the third source of emission i.e. Municipal Solid Waste Dumping Grounds are emerging as a potential CDM activity despite being provided least attention till date.

CONCLUSION: There is uncertainty about the future of Kyoto Protocol after 2012.Which means an uncertain CDM market. The European countries are keen to get developing countries like India and China as well as US and Australia, two of the biggest emitters, to also take on commitments there is talk in the air of Protocol falling through if they dont. The uncertainty and speculation keeps the carbon market depressed and makes some players shy away from investing. India like China and other big developing nations, remain steadfast on its standard line that it has a right to economic growth. Its much often stated position is simple if the world wants developing nations to clean up for the mess that others made, they should put their money where their mouth is. There is a great opportunity awaiting India in carbon trading which is estimated to go up. In the new regime, the country could emerge as one of the largest beneficiaries accounting for 25 per cent of the total world carbon trade, says a recent World Bank report. The countries like US, Germany, Japan and China are likely to be the biggest buyers of carbon credits which are beneficial for India to a great Extent. The Indian market is extremely receptive to Clean Development Mechanism (CDM). Having cornered more than half of the global total in tradable certified emission reduction (CERs), Indias dominance in carbon trading under the clean development mechanism (CDM) of the UN Convention on Climate Change (UNFCCC) is beginning to influence business dynamics in the country. India Inc pocketed Rs 1,500 crores in the year 2005 just by selling carbon credits to developed-country clients. Various projects would create up to 306 million tradable CERs. Analysts claim if more companies absorb clean technologies, total CERs with

India could touch 500 million. Of the 391 projects sanctioned, the UNFCCC has registered 114 from India, the highest for any country. Indias average annual CERs stand at 12.6% or 11.5 million. Hence, MSW dumping grounds can be a huge prospect for CDM projects in India. These types of projects would not only be beneficial for the Government bodies and stakeholders but also for general public.