Carbon Trade Trends

A Research Paper By Dr. Seethalexmy N. Professor And Mr. Ganesan Jaibal T.Y.B.Com Student Of S.I.E.S. College of Commerce Economics T.V. Chidambaran Marg, Sion (E), Mumbai 400 022 Ph 9869261576 (Prof. Seethalexmy), 9967680584 (Mr. Ganesan) Email [e-mail], [e-mail] Abstract This paper deals with the trends in carbon trade in the global market as well as in India. Not limiting itself with studying the economic impact of carbon trade, the paper also goes on to understand its ecological implications. The paper also reviews the pricing and accounting of carbon credits and its implications. The trends indicate that carbon trade has been increasing over the years. However, the project based transactions such as Clean Development Mechanism and Joint Implementation have shown a decline since 2007 the main causes for this being the global economic downturn and the speculation led growth of the secondary carbon market. In India, the recent trend is that of withholding the sale of carbon credits as the prices are low and as sellers expect demand to increase after the end of Phase I of Kyoto Protocol i.e. in 2012. The major economic implications may be the rising commodity prices in the developed countries on account of passing on of the price paid for carbon credits to the customers. Inflation in the developing countries is also one of the possible implications, which, of course, can be handled with appropriate regulatory weapons. An important economic impact in the current scenario of low prices is the pitiable position of those industries that have made huge investments in CDM projects expecting to recover their costs by selling the carbon credits without anticipating the fall in prices. Accounting for carbon credits in India could be done within the existing framework of the Accounting Standards issued by the Institute of Chartered Accountants of India. Market-based mechanism cannot effectively achieve the ecological objective of reducing