Vol. 11, Issue 6, Part A (2025)

Abstract
The economic development of countries worldwide is facing a threat from rapid climate change. This has compelled nations to explore ways to mitigate climate change. Human activities like large-scale greenhouse gas emissions contribute heavily to global warming and climate change. One of the most prominent among these greenhouse gases is carbon dioxide (CO2). A potential solution to reduce carbon dioxide emissions while ensuring continued economic growth is the Carbon Trading Mechanism. This mechanism is a market-based policy tool used to reduce carbon emissions by allowing the trading of carbon emission rights between countries and within countries. It incentivises enterprises economically to reduce or avoid their carbon emissions through carbon credits. This mechanism is now used by countries to realise their pledges under the Paris Agreement, which constructed a legal base for creating a global carbon market. The scheme is already operational in many countries, both at national and regional levels. This paper strives to analyse the Carbon Trading Mechanism as a potential solution for climate change mitigation. The paper starts with an introduction to the topic, then attempts to create a brief understanding of the carbon trading mechanism; then, in the next part, it endeavours into the evolution of the idea of Carbon Trading, and thereafter, the next part is about the purpose and need of the mechanism. The paper then explores the contestations concerning the carbon trading mechanism’s effectiveness in reducing emissions; then comes to evaluation of Glasgow CoP26 and the future of the carbon trading mechanism; then subsequently studies India’s initiatives towards carbon trading, and then finally gives a conclusion. This paper is based on a mixed-method approach using both qualitative and quantitative research methods. It is based on secondary sources collected from scholarly articles, books, reports, newspaper articles, etc.