Insight into Carbon Trading : Understanding the Behavior of Emissions Market with a Financial Perspective. (With Abstract)

Every country is making efforts to reduce the concentration of greenhouse gas emissions, either voluntarily or due to the existent or expected regulatory constraints. This has created an opportunity for the trade of emission credits both within and outside of the regulated area, thereby laying the ground for a global "carbon market". Among the emissions markets for environmental services currently in operation, the carbon market has the widest reach. The objective of this paper is to review where these markets stand as of today and to throw light on some of the trends that are expected to emerge in the near future. The authors have attempted to discuss issues related to carbon markets, which involve different underlying assets, pricing mechanisms, contractual structures, and risk management. The paper also discusses the global scenario and the opportunities in the Indian context.