India expects to achieve a net zero target by 2070 and an efficient carbon market is an important catalyst towards this goal. In this context, explain the mechanism of carbon markets.

Carbon market is a market where buying and selling of carbon credits take place. Its motive is to reduce global carbon emissions. The Kyoto protocol and the Paris agreement, both provide provisions for development of the carbon markets.

How it works:

• The fundamental idea behind this mechanism is that the countries or entities which are polluting more than their allowed limits can purchase the right to pollute more from those countries or entities which have not reached their emission limits.
• One credit is given for a one ton reduction in carbon dioxide.
• Carbon credits are points that are issued to an entity for undertaking an activity that has the effect of either avoiding emission of carbon dioxide into the atmosphere or absorbing some of the carbon dioxide back from the atmosphere. 
• The method to earn a carbon credit can include renewable energy, technology upgradation, or afforestation – that helps to reduce carbon dioxide emissions, and credit that can be sold in the market.
• The incentive is given in the form of carbon credit for avoiding emission or absorbing carbon dioxide back from the atmosphere, thereby helping to limit the rise of global warming.
• Similarly, polluters are penalised for not being able to avoid emissions. So, they pay the seller of carbon credits for reducing carbon dioxide in the atmosphere.
• The sellers or buyer can be anybody, typically companies, governments, municipalities or any other organisation.

Benefits:

• They empower communities, protect ecosystems, and reduce reliance on fossil fuels.
• Carbon markets can potentially help in emissions reductions better than traditional methods.

Global warming is the most critical problem faced by the world today. The carbon market should be promoted to limit the carbon emissions and control global warming.