22.10 ndian onom
The ratio indicates how efficient new investment comparison of greenhouse gases with each other in
contributes to the growth of an economy. the context of the relative potential to contribute
A capital-output ratio of 3:1 is better to the to global warming. For trading purposes, one
4:1 as the former needs only three units extra credit is considered equivalent to one tonne of
capital to produce one extra output in comparison CO2 emission reduced.
to the latter which needs four units for each extra
unit output. cArry trADe
Borrowing in one currency and investing in
another is termed as carry trade. In recent times
Amidst growing concern and increasing awareness (upto November 2007) trillions of dollars have
on the need for pollution control, the concept been borrowed in low-cost ‘yen’ for deployment
of carbon credit came into vogue as part of an across money markets, stock markets, and even
international agreement, known popularly as the real estate markets across the globe and a part of
Kyoto Protocol. Carbon credits are certificates the money flowed into India, too.
issued to countries that reduce their emission of
GHG (greenhouse gases) which leads to global cAsh cow
warming. It is estimated that 60–70 per cent of
the GHG emission is through fuel combustion in A profitable business or firm (may belong to either
industries like cement, steel, textiles, and fertilisers. public or private sector) which gives regular cash
Some GHGs like hydro fluorocarbons, methane, flow to the owner (this happens either due to
and nitrous oxide are released as byproducts of regular demand of the popular goods produced by
certain industrial process which adversely affect the firm or the compulsions of the consumer to
the ozone layer, leading to global warming. buy the products). As for example, the antiseptic
The concept of carbon credit trading seeks lotion ‘Dettol’ is a cash cow for Reckitt and
to encourage countries to reduce their GHG Colman in the private sector and LPG is a cash cow
emissions, as it rewards those countries which meet for the manufacturing and marketing government
their targets and provides financial incentives to companies (provided there is no subsidy on LPG).
the others to do so as quickly as possible. Surplus
credits (collected by overshooting the emission cAveAt emptor
reducing target) can be sold in the global market. A Latin phrase which means ‘let the buyer beware’.
One credit is equivalent to one tonne of CO2 Simply put, it means that the supplier has no legal
emission reduced. Carbon Credit (CC) is available obligation to inform buyers about any defects in
for companies engaged in developing renewable his goods or services; the onus is on the buyer to
energy projects that offset the use of fossil fields.
himself determine the level of satisfaction out of
The trading of CC takes place on two stock the products.
exchanges, the Chicago Climate Exchange and the
European Climate Exchange. CC trading can also ceteris pAribus
take place in the open market as well. European
countries and Japan are the major buyers of carbon A Latin phrase which means ‘other things being
credit. Under the Kyoto Protocol, global warming equal’. The phrase is used by economists to cover
potential (GWP) was an index that allowed for the their forecastings.