Pakarab Fertilizers (Pvt.) Ltd., Multan has earned $ 13 million through the sale of CERs (Certified Emission Reductions) in its first year of launching (2008) the project, Clean Development Mechanism (CDM). The total cost of the project is $18 million. Hardly, a day passes without listening or reading some news about Global Warming (GW) on television channels and newspapers. GW has become the most discussed, hottest and the disputable matter of the world. Many organizations and world famous personalities like Al-Gore, ex vice-president of USA, are trying their utmost to point out the consequences of GW that the world is facing and the future generations will face. However, the GW has become a blessing for the developing countries like Pakistan under the auspices of Kyoto Protocol. According to the United Nations Environment Programme, "Kyoto Protocol is an agreement under which industrialized countries will reduce their collective emissions of greenhouse gases (GHG) by 5.2% compared to the year 1990". So far, 183 countries have ratified the Kyoto Protocol. The industrialized countries are legally bound to reduce the emissions of 4 GHG (carbon dioxide, methane, nitrous oxide, sulphur hexafluoride) and 2 groups of gases (hydrofluorocarbons and perflurocarbons). Although USA is a signatory to the Kyoto Protocol but it has not yet ratified the agreement under the pretense that India and China are not included in the list of industrialized countries. This is despite the fact that USA contributes almost one third of the total carbon dioxide emissions in the world. The developed countries, in order to conform to the Protocol, set quotas on the businesses for the emissions of GHG. Businesses that are producing excess GHG must adopt a mechanism to offset the quota. The reduction of GHG will be done over the 2008 to 2012 period. The concept of Carbon Credit is formalized into Kyoto Protocol. Carbon credits are certificates awarded to those countries that are successful to reduce the emission of GHG. For trading purposes, one carbon credit is considered equivalent to one tonne of CO2 emission and this carbon credit can be sold in the international market like other commodities at the prevailing price. So far, four exchanges are dealing in carbon credits: The Chicago Climate Exchange, European Climate Exchange, Nordpool and Powernext. In Kyoto Protocol, three mechanisms have been chalked out through which the developed countries can reduce the emission of GHG: 1 Joint Implementation (JI) 2-Clean Development Mechanism (CDM) 3 International Emission Trading (IET) Under JI, a developed country with high costs of domestic GHG reduction would set up a project in another developed country, where the cost of GHG reduction project is comparatively low. The remaining two mechanisms provide opportunities to the developing countries to create carbon credits. Under CDM, a developed country can take the GHG reduction project in a developing country where the costs of such projects are usually quite low. The developed country, in turn, would get the carbon credits for meeting its emission targets and the developing country would get the capital and clean technology to implement the project. Additionality is an important concept in the CDM. It means that the project must produce fewer GHG emissions than the baseline scenario. It is essential that the project achieves environmental additionality- otherwise; it will not generate carbon credits. Any company, factory or farm owner can get linked to the United Nations Framework Convention on Climate Change (UNFCCC) and know the 'Standard' level of carbon emission for its activity. Every country, which has ratified the Kyoto Protocol, has a national agreement to validate its carbon project through one of the UNFCCC's approved mechanisms. Once approved, these units are termed Certified Emission Reductions or CERs. According to the figures released by World Bank in May 2008, China (73%) and India (6%) have the maximum number of GHG reduction projects. Under IET, countries can trade in carbon credits with one another in the international market. The countries with surplus carbon credits can sell them to the developed countries that are legally obligated to reduce the emission of GHG. The trading of carbon credits has become one of the fastest growing segments in financial services in the city of London's financial district with a market worth about $30 billion and there is strong probability that the market could grow to $ 1 trillion within a decade. According to Louis Redshaw, a former trader at Enron and now head of environmental markets at Barclays Capital predicts, "Carbon will be the world's biggest commodity market and it could become the world's biggest market overall." India's carbon market is growing faster than any other sector. According to Prodipto Ghosh, member of the Prime Minister's Council on Climate Change "the revenue from already established 200 projects is estimated at $2 billion till 2012", 850 projects are in the pipeline and on the completion of these projects; the revenue from carbon projects will increase many folds in future. As mentioned above, Pakistan's first CDM project Pakarab Fertilizers (Pvt.) Ltd, Multan has been launched successfully. Co-sponsoring agency in this project is Mitsubishi Corp. Japan. Emission reduction will be 13 million tonnes CO2 equivalent per year through this project. The second project "Cattle Waste Management Landhi Cattle Colony, Karachi" will start in April 2009. The sponsoring agency is European Consultants New Zealand Agency for International development while the co-sponsors are City District Govt., Karachi and Society for Environmental and Economic Improvement of Cattle Colonies in Karachi. The total cost of this project is $102.15 million. The total emission reduction would be 1.53 million tones CO2 equivalent per annum. The revenue from this project is estimated to be $ 67.86 million per year ($43.80 million from sale of organic manure at Rs. 5/kg, $8.75 million from sale of 25 MW electricity to KESC, $15.31 million from sale of Carbon Credits at $10/tonne of CO2). Another project "New Bong Escape Hydropower Project, AJK" will start in December 2009. The total emission reduction through this project would be .22 million tones of CO2 equivalent. The cost of this project is $148.55 million and the revenue is expected to be $28.54 million per year ($25.24million/annum from sale of Hydropower and $3.3 million/annum from sale of CERs). There are some projects in the pipeline which will be completed in the next one to two years. However, the number of such projects is quite less as compared to the potential of Pakistani market for carbon credits. It is estimated that the Pakistani industries can earn more than $400 million through the sale of carbon credits. The need of the hour is to disseminate the information about the carbon financing. This task can only be accomplished through the close collaboration of Ministry of Environment and the private sector. Although, the Kyoto Protocol will expire in 2012, there are already negotiations going on for another treaty that will succeed it. So, there are many opportunities lying ahead for Pakistani entrepreneurs to get benefit from the booming industry of carbon credits. (The write is a student at SZABIST and presently doing MBA)