Abstract
The Carbon trading is one of the fastest growing financial markets in the world. It is the most visible result of early regulatory efforts to mitigate climate change, and grew out of the Kyoto Protocol, which was adopted in 1997. The protocol requires that developed countries will achieve greenhouse gas emission reductions of at least 5% against baseline levels of 1990. To help countries achieve that goal it established the Clean Development Mechanism (CDM), which promotes sustainable development in developing countries while spurring cost-effective reductions in greenhouse gas emissions in the more polluting developed countries. India offers a large potential for CDM because of its inherent dependence on fossil fuels for development. So countries with relatively low abatement and transaction costs like India are a major attraction for CDM projects. Forestry activities and land use changes contribute about 22% carbon emission in the tropics. On the other hand trees also have the ability to remove equal amount of carbon dioxide from the atmosphere through photosynthetic activity. Trees play a key role in carbon trading in the tropics and the forests are often called as ‘carbon sinks’. According to one estimate about 1000 G. t. of Carbon is stored in the forests of the world and 50 per cent of the dry weight of a tree is carbon. However the denudation of the forests at a faster rate and illicit felling of trees for various usages have indirectly disturbed the carbon trading and there by leading to accumulation of CO2 in the atmosphere which in turn aids global warming as CO2 is one of the dangerous Green House Gases (GHGs), which play a key role in retention of high temperature on the earth surface.
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