Finance Avenue

Better Late then Never! The developed, industrialized nations of the world have realized the huge cost the environment and the mankind is bearing in the name of development. The burning of fossil fuels in the industries like textile, Iron and steel cement etc have led to emission of bad and harmful greenhouse gases like Carbon-di-oxide, methane, nitrous oxide and hydro-fluorocarbons. These lead to global warming, giving rise to a lot of natural calamities. You know this, right?
IPCC, International Panel on Climate Change has tried several measures to control it but in vain! Even the taxation schemes, whereby the nations are taxed on the basis of carbon emissions, failed.  So, the IPCC along with the leading economists and world leaders formalized a mechanism, known as the Kyoto protocol, were by a monetary value is assigned to the amount of carbon emissions, a signatory to the protocol, generates annually. This is precisely the idea behind carbon credits. They aim at reducing global warning by capping total annual emissions and assigning a monetary value to any shortfall though trading. The whole thing works like this. Nations are assigned an emission limit which is further divided and relegated to various industries, known as operators, within it.
Each operator has   to carry on production within that limit, exceeding which he will have to purchase carbon credit from another operator or from the international market through any of the recognized exchanges: Chicago Climate exchange, European Climate Exchange, Nord Pool, Power Next and European Energy Exchange. Under allowances of Credit, 1 unit gives the operator right to emit 1 metric tonne of carbon-di-oxide and other green house gases. Price of the same are quoted in terms of Euros per tonne of CO2. Best part is that these credits can be exchanged in international market and follow the rules of demand and supply, which will obviously push their cost up. No wonder then, that Managing Emissions has become one of the fastest growing segments in the financial segments, what with the emissions forming a part of the internal costs of a firm and being reflected on its balance sheet. And the reason why credits are preferable over taxation is that the price of these credits are determined by the free play of market forces and within the frame work of guidelines outlined in the Kyoto Protocol. Taxation on the other had is decided by the politicians and are not necessarily deployed towards the development of environment.
Even we, as individuals can play our part in this endeavor to minimize greenhouse emissions by lowering our carbon footprints. So the next time you see a light burning uselessly, switch it off thinking about the carbon credit of your nation and of course your electricity bill!