For example if a company in India cuts X tones of carbon, it can sell this much amount of points to a company which is emitting carbons in the developed country. The World Bank itself is the monitoring authority.
Hence carbon trading allows carbon emitting industries in the developed countries to set of their emissions by investing in a large scale mass reforestation projects in the developing countries to nullify their emission. 100000 hectares of forest can eliminate one million tons of carbon in a year from the environment.
India is the second largest country after china. India has generated 30 million carbon credits and expecting 140 million credits in the long run. Around thousand carbon credit projects have already started and around two hundred new projects every year added every year.
Presently, carbon credit from thermal projects gives 7 to 8$ in the international market. Now NCDEX is to commenced carbon trading in Indian market. Carbon trading is one of the fast growing volatile market.