Carbon Market

They establish trading systems where carbon credits or allowances can be bought and sold.

Carbon Market

What are Carbon Markets?

  • Carbon markets are essentially a tool for putting a price on carbon emissions— they establish trading systems where carbon credits or allowances can be bought and sold.
  • A carbon credit is a kind of tradable permit that, per United Nations standards, equals one tonne of carbon dioxide removed, reduced, or sequestered from the atmosphere.
  • Carbon allowances or caps, meanwhile, are determined by countries or governments according to their emission reduction targets.
  • A United Nations Development Program release this year noted that interest in carbon markets is growing globally, i.e., 83% of NDCs submitted by countries mention their intent to make use of international market mechanisms to reduce greenhouse gas emissions.

Two types of Carbon Markets:

  • Compliance Market –
  • These are set up by policies at the national, regional, and/or international level— are officially regulated.
  • Entities in this sector are issued annual allowances or permits by governments equal to the emissions they can generate.
  • If companies produce emissions beyond the capped amount, they have to purchase additional permit, either through official auctions or from companies which kept their emissions below the limit, leaving them with surplus allowances.
  • The market price of carbon gets determined by market forces when purchasers and sellers trade in emissions allowances.

Voluntary Market:

  • These are markets in which emitters— corporations, private individuals, and others— buy carbon credits to offset the emission of one tonne of CO2 or equivalent greenhouse gases.
  • Such carbon credits are created by activities which reduce CO2 from the air, such as afforestation.
  • In a voluntary market, a corporation looking to compensate for its unavoidable GHG emissions purchases carbon credits from an entity engaged in projects that reduce, remove, capture, or avoid emissions.

 


Q1) Is greenhouse gas good or bad?

In the right amounts, greenhouse gases, like carbon dioxide, methane, nitrous oxide, are helpful, rather than harmful, because they can help regulate the temperature of the planet.

Source: Ministry of Power and Ministry of Environment to develop Carbon Credit Trading Scheme for Decarbonisation

Latest UPSC Exam 2025 Updates

Last updated on June, 2025

UPSC Notification 2025 was released on 22nd January 2025.

UPSC Prelims Result 2025 is out now for the CSE held on 25 May 2025.

UPSC Prelims Question Paper 2025 and Unofficial Prelims Answer Key 2025  are available now.

UPSC Calendar 2026 is released on 15th May, 2025.

→ The UPSC Vacancy 2025 were released 1129, out of which 979 were for UPSC CSE and remaining 150 are for UPSC IFoS.

UPSC Mains 2025 will be conducted on 22nd August 2025.

UPSC Prelims 2026 will be conducted on 24th May, 2026 & UPSC Mains 2026 will be conducted on 21st August 2026.

→ The UPSC Selection Process is of 3 stages-Prelims, Mains and Interview.

UPSC Result 2024 is released with latest UPSC Marksheet 2024. Check Now!

UPSC Toppers List 2024 is released now. Shakti Dubey is UPSC AIR 1 2024 Topper.

→ Also check Best IAS Coaching in Delhi

Vajiram Editor
Vajiram Editor
UPSC GS Course 2026
UPSC GS Course 2026
₹1,75,000
Enroll Now
GS Foundation Course 2 Yrs
GS Foundation Course 2 Yrs
₹2,45,000
Enroll Now
UPSC Prelims Test Series
UPSC Prelims Test Series
₹6000
Enroll Now
UPSC Mains Test Series
UPSC Mains Test Series
₹16000
Enroll Now
UPSC Mentorship Program
UPSC Mentorship Program
₹85000
Enroll Now
Enquire Now