The greenhouse effect and global warming are due to carbon emissions. Much of the global warming is due to power plants, cars and other auto vehicles, airplanes and the like. In order to reduce such emissions, various incentives such as the Carbon Credits are being provided. The basic idea is that the person who pollutes should pay a certain sum, which goes to the country where there is less pollution. Therefore, the carbon credit mechanism is very important as a source of funding for infrastructure which looks to reduce pollution such as Compressed Natural Gas (CNG) in place of petrol, metro rails in place of auto transport and various kinds of aero engines which do not pollute. On the power front, hydro, gas and solar in place of coal, give considerable scope for regulating carbon emissions. The whole mechanism is governed by the United Nations through United Nations Framework Convention on Climate Change (UNFCCC), the most important development of which is the Kyoto Protocol. The present study spotlights the raise of the concept of carbon credits in the background of global warming. The paper, among others, discuses the influence of carbon emissions on the climate; introduces the concept of carbon credits with due reference to greenhouse effect and global warming; and examines the key issues in carbon credits in the pretext of Kyoto protocol.

"By giving pollution a price, emission and pollution control will become a plain economical asset, shown on the company's balance sheet". With the shared interest of industrialized countries in combating pollution, global warming the United Nations Kyoto Protocol came into existence. For the first time an international treaty to check emissions of greenhouse gases was negotiated in the year 1997 in Japan's one of the ancient cities Kyoto. It is a continuum to 1992s UN treaty on climate change.

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