Munich Personal RePEc Archive

A Review Paper on Carbon Trading

Kohli, Deepti and Sinha, Pankaj (2014): A Review Paper on Carbon Trading.

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Carbon dioxide (CO2) emissions in our atmosphere have been increasing steadily due to the burning of fossil fuels such as coal, gas and oil, etc. CO2 being a Greenhouse Gas (GHG) has contributed to global warming resulting in the melting of polar ice caps and glaciers leading to a rise in the sea levels and finally culminating in the submerging of coastal and low-level areas all around the world. Thus, with the intention of controlling global warming and the rising CO2 emissions, the Kyoto Protocol was set up in 2005 to compel the developed countries to lower their greenhouse gas (GHG) emissions thus giving rise to the concept of carbon credits, devised to reduce global carbon emission levels.

However, the first phase of the sole international agreement to cut GHG emissions came to an end in 2012. The Kyoto Protocol has not been qualified as an absolute success seeing that it has not produced any demonstrable reduction in emission levels, and global temperatures are still rising at an alarming rate. A miscarriage of the treaty can also be sensed through the demeanor of countries like Canada, which pulled back from the treaty in 2011; Japan and Russia, who would not commit themselves beyond 2012 while the United States remains aloof.

This study reviews the climate change regime and explores the concept of carbon credits, how carbon trading is occurring presently and also identifies some key issues concerning the same. The reasons for the unsatisfactory results of the Kyoto Protocol and prospects in mitigating climate change have also been discussed here.

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