Gyanendra Kashyap of 4Ps B&M gives the final F-word-primer on facts, figures, foibles and farces in carbon trading...

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They could have called it carbon dating instead of carbon trading, for all we care, given the completely controversial and practically outdated methodology on which this concept thrives! But we’ll cross the damned Kwai bridge when we reach it. First, the ides of March. There is no question that global warming has been the most talked about phenomenon in the last century and in this one too. Environmentalists have more often than not been sidelined as the trouble creators. Surprisingly, the most impactful of all the environmentalists has perhaps been the one who has been least known – the man who is credited with inventing carbon trading (pundits call him the father of carbon trading) – Richard Sandor! The man gave an economic value to efforts dealing with reduction in pollution, the most crucial aspect of environment. Sadly, what he envisioned is perhaps miles off what is becoming of this ‘business’.

Carbon trading is a part of international emission trading norm, which incentivises companies and/or countries that emit less carbon. If a company is registered with the appropriate council (mentioned later in the article), and it manages to ‘emit’ carbon dioxide ‘less’ than the quota allocated to it, then the company ‘earns’ a certain number of carbon credits, which, later on, the company can sell in carbon trading bourses to other firms that have exceeded their allocated limits of carbon dioxide production. That’s as simple as it should have been... Well, it somehow didn’t work out that way.

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Source : IIPM Editorial, 2008

An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).

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