Who will pay you Rs 450 as interest amount on a principal of Rs 500 in a period of six months? The answer is not Grameen Bank or any charity fund, it's Tata-Indicom. Yes guys that's true, surpassing the benevolence of any financial institute till date, Tata-Indicom, a telecom biggie in India, has done this favor to me. I have not calculated the interest rate for this case but that's definitely way above the market standards; especially when the global economy is in under slowdown.
Well, that's the one side of the story, unfortunately, the other side of the story is not that bright. It started last year, Oct '07, when two payment transactions were made against my Tata-Indicom PC wireless data card account - one was from the Electronic Clearance System (ECS) and the other one which I made online, on the due date, to avoid late payment fee. Next month, I had to close down my connection which resulted in a negative balance in favor of me. The connection was disconnected without any issue but the balance was not met. I called up their Customer-Care (CC) and the guy over the phone told me that it is under progress and I will get my money ASAP ( as per the norms, account is balanced within 60 days of closure). I don't know why, I was having an ominous feeling somewhere deep in my heart. I believe, that's because of the impression which Indicom's CC has made during my stint as their customer in last 18 months. To be very precise and honest, my experience with Indicom's CC had been very unsatisfactory, thanks to many horrible sessions which I had to go through. There was no dearth of issues, whether it's billing or connection related and on top of that, the incompetent CC department was never able to solve any issue quickly; and yes how can I forget that irritating piece of promotional audio which would loop through non-stop while you hold on the line to reach your CC exec or the supervisor, the messiah. The CC exec would generally ask for your mobile number, after many failed attempts, and tell you that you will be called up within eight hours and provided with an update on the issue; but rest assured, you will never get any call back. That's their signature for care and that's their USP, Unique Screwing Point.
Coming back to my balance amount, the amount was not a big one but still that's my money, in spite of being sceptical about the Indicom's processes, I somehow assured myself that my money will come back soon, extending my expectation by a month more than their proclaimed 60 days. As expected, time zapped like anything and 60 days were over and I didn't even got a call from my ex-vendor. This had no element of surprise but scare, I was petrified to call up the CC number and hold the line for minutes listening to the same promotional audio, talking to few more not-so-competent CC execs and then again getting through that vicious cycle of call back and no follow-up. Later after few calls with the CC I assured myself that my scare was not justified, as this was just the tip of an ice-berg, just a beginning and I should be capable of handling more of these; I must acclimatise accordingly. Soon, I was following up this issue on a weekly basis and every time the CC exec would tell me that they are working on this issue and the work is in progress, and in every call he/she used to assure me that by next week I shall be receiving my cheque at my doorstep. This continued for months, the issue stated in the month of November and was still lingering till April of next year, isn't that ridiculous. I used to wonder, during this period, Indicom must have calculated its quarterly results twice and hopefully they were accounting my money, a paltry sum, in the liability column of their balance sheet. I felt, all this mess was, probably, just because of some process that's in a dead-loop or some financial guy who was working dead-slow to pass my bill. One day, during my weekly check-up one of the CC exec appalled me, he told me that the cheque was sent to me last week and it got returned from my side, I asked about the courier service provider name, its number and reason for return; he was having answers to none of them, moreover, I also checked my office despatch section( I had given my office address for all communications) and found nothing such, at all; I don't know why this story sounded ominous to me. Was that CC exec trying to sell his malign half-baked story? Was he testing my limits? I didn't had answers to any of these questions but I did had a rancorous feeling. It was more than five months of dilly-dallying and now I was being served with ignominious and foolish acts. Now the idea of suing Tata-Indicom was being seriously mooted, I really meant that, so in this regard I was trying to get some information. One day, I came across this website - www.consumercourt.netfirms.com ( folks please take your time and visit this website, might come handy) and made my mind to go through the legal proceedings; but due to some reasons I procrastinated this step for few days more. But in the meantime, I was calling CC not to reach the execs but supervisors now, almost on all alternate days, probably I wanted to avoid the legal path for few more days, to give a final try to pursue them to get this thing through. During this whole process I learnt that shouting and cursing them is definitely not the way to pursue, in these situations, what works better is mild insults; insult not to them but to the process which they follow, to the unjust thing which was happening due to not-so-responsible acts of them. And guess what, it started showing some positive results, one of the supervisor even kept her promise to call back, that was wonderful, positive and motivating. This persuasion went for few more days and finally on one auspicious day I was enthralled to get a cheque from Indicom. Finally the saga ended.
The whole chapter reminds me of the popular animated series of Dragonballz. It had myriad episodes in which the protagonist, Goku, fights one the antagonist, Freeza, it took around 20 episodes for Goku to kill Freeza, with many twists and turns and Ekta Kapoor's serial like escalating drama. But finally the truth prevails and perseverance pays off. Similarly, in this case, truth and perseverance worked out for me and my Rs 500 was back to me with a good interest.
Tuesday, May 27, 2008
Wednesday, May 21, 2008
GOD: A marvel of human
Imagine the pathetic situations our prehistoric Neanderthal ancestor must have been through; one day he is running away from the fiery forest fire, trying to save his ass and the other day he is crouching beneath a small cave just to keep himself dry and away from a thunderstorm. His heart pounding hard and his mind wishing a quick end to those unknown natural, supernatural for him, phenomenons. After few such encounters with nature, he must have been overwhelmed by indignation and dying to curse the reason behind such an unjustified situation. But Alas! unlike us, he doesn't have any word or language to use. Probably humankind's first words were meant to curse that unknown reason behind those super-natural activities.
However, human is a die-hard organism, it not only survived the ferocious and looming carnivores and the killing natural phenomenons, it also evolved rapidly. It evolved so much that now it controls the whole world. Probably, the evolution of human mind was more significant than the evolution of its physical traits. Human mind is very self centric and intelligent, as it always tries to keep it self away from any trouble so that the gene pool continues to exist and reproduce. Humankind moved from hunter-gatherer to agricultural mode cutting down on risky activities, guaranteeing better nutrition and minimizing risk. But again, it has to bear the adversaries of nature such as draughts and heavy rainfall. However, human brain got more intelligent, it recognized the power of nature and understood, or rather misunderstood, it as God, hence all the nature's powerful entities like the Sun, the Rain( even animals) were given the status of God. Anything which was more powerful than human and, more importantly, which was not controllable was certified pious( One who knows Hinduism can understand it better, almost all species are listed sacred) . Early civilizations like Mayans, Harappas, Aztecs had the Sun and the phenomenon rain elevated to the status of God, they worshiped, offered sacrifices to please them to ensure their civilization's existence; doing so made them happy and feel secure, it was like creating your own world in which you had all control. As the human society evolved and hence got more complicated, the concept and need of God, to keep it binding, also evolved. This gave rise to different religions and followings. Christianity, Hinduism, Islam , to name a few, are the religions which are thousands of years old and have billions of followers. And, perhaps during this period only our human race saw the most rapid growth - both from sociological and science and technological front. During this period as human being refined its knowledge about nature and its surrounding, it also kept on modifying the definition of religion and God. Few months back Vatican included a new bullet in its list of sinful behaviour: Thou shall not pollute the Earth. This shows the adaptive nature of human mind, adaptations to help its race sustain; adaptation to ensure longevity. Arguably, humankind's belief in God and Religion was one of most important and critical reason for its success and development as an species, without which our society and race must have perished under the its own weight of development and progress; and this will continue. But one ponders how long is it going to continue this way; may be, till the need of god is understood as redundant.
Now after pondering a lot on these things, I have started to believe that considering human being a creation of God is nothing but fallacy; it's other way round. It's human being who created God; it us who unconsciously created religion and god, during the course of evolution, to ensure survivability. Now as time moves on, we are going to tailor this as per our need, as per our requirement. Who knows, after few decades, we might be producing genetically modified children, who can go on without food for days and subsequently prompting Vatican to remove Gluttony from the sins list. It's the theism which is changing but atheism is where it was.
However, human is a die-hard organism, it not only survived the ferocious and looming carnivores and the killing natural phenomenons, it also evolved rapidly. It evolved so much that now it controls the whole world. Probably, the evolution of human mind was more significant than the evolution of its physical traits. Human mind is very self centric and intelligent, as it always tries to keep it self away from any trouble so that the gene pool continues to exist and reproduce. Humankind moved from hunter-gatherer to agricultural mode cutting down on risky activities, guaranteeing better nutrition and minimizing risk. But again, it has to bear the adversaries of nature such as draughts and heavy rainfall. However, human brain got more intelligent, it recognized the power of nature and understood, or rather misunderstood, it as God, hence all the nature's powerful entities like the Sun, the Rain( even animals) were given the status of God. Anything which was more powerful than human and, more importantly, which was not controllable was certified pious( One who knows Hinduism can understand it better, almost all species are listed sacred) . Early civilizations like Mayans, Harappas, Aztecs had the Sun and the phenomenon rain elevated to the status of God, they worshiped, offered sacrifices to please them to ensure their civilization's existence; doing so made them happy and feel secure, it was like creating your own world in which you had all control. As the human society evolved and hence got more complicated, the concept and need of God, to keep it binding, also evolved. This gave rise to different religions and followings. Christianity, Hinduism, Islam , to name a few, are the religions which are thousands of years old and have billions of followers. And, perhaps during this period only our human race saw the most rapid growth - both from sociological and science and technological front. During this period as human being refined its knowledge about nature and its surrounding, it also kept on modifying the definition of religion and God. Few months back Vatican included a new bullet in its list of sinful behaviour: Thou shall not pollute the Earth. This shows the adaptive nature of human mind, adaptations to help its race sustain; adaptation to ensure longevity. Arguably, humankind's belief in God and Religion was one of most important and critical reason for its success and development as an species, without which our society and race must have perished under the its own weight of development and progress; and this will continue. But one ponders how long is it going to continue this way; may be, till the need of god is understood as redundant.
Now after pondering a lot on these things, I have started to believe that considering human being a creation of God is nothing but fallacy; it's other way round. It's human being who created God; it us who unconsciously created religion and god, during the course of evolution, to ensure survivability. Now as time moves on, we are going to tailor this as per our need, as per our requirement. Who knows, after few decades, we might be producing genetically modified children, who can go on without food for days and subsequently prompting Vatican to remove Gluttony from the sins list. It's the theism which is changing but atheism is where it was.
Tuesday, May 13, 2008
Training Resources or Draining Resources
Investments are made only when returns are expected. I would not plant an apple sapling if I am not going to consume any apple or trade apples in market. Even if I do want to consume or trade, before investing I would like to make sure that I break-even on my investments and start making profit as soon as possible; in case it's not possible then it's pragmatic to look for other means to satisfy my want. I believe, similar thought goes true in case of training resources in any firm, especially for firms whose market is having cut-throat competition, like IT firms.
Apparently, top management of my employer, which happens to be one of the largest IT service provider in India, doesn't thinks so. Recently, there was an initiative driven by our industry lead; the so called "initiative" christened as Know Your Industry, aka 'KYI', desired to imbibe all of the resources with sound knowledge of its domain. These KYI sessions and trainings spanned from basic information, evolution and future of industry, various technologies, frameworks, processes et al related to our industry. The initiative mandated all resources (my estimate is that the total number of resources is not less than four thousand odd people) to go through the trainings and sessions. No doubt all these pieces of information passed on through this initiative were pretty good but at the same time they were redundant and also obsolete in some cases, at least from my perspective. The whole package demanded at least one full day for one average resource to read/attend sessions, understand and assimilate the information. Which means that the investment in terms of man-hour was around 4000X8 units (leave aside the cost of planning and execution from management side); that's a huge figure going down the drains when not more that 5 percent of the total effort is going to bear fruits (I might be having a lot of free time to write a blog or surf around but there are scores of people who do, apart from the regular work, stretch assignments and support their applications). Kindly note that i am not against fruitful trainings; trainings are good and a crucial tool to keep yourself updated with the industry and to learn new stuffs, and trainings should be guided by ones project and personal development needs.
Most of us understand the significance of trainings. We try to relate trainings with the outcome which can be derived from it, so when a resource finds that the management mandated training is nowhere related to his daily work and responsibility and even doesn't falls in line with his/her personal learning's keenness then the resource loses all affinity to that training. This results in failure of the whole purpose- the purpose behind training people. Moreover, knowledge without implementation is of no use; if I know the intricacies of my industry, say Telecoms, but I am unable to leverage that knowledge due to lack of scope, then the knowledge is as good as nothing. Hence the whole KYI seems to be redundant.
Not only did the KYI seems redundant, it was also obsolete in some cases. During one of the session, the instructor was talking about convergence and 3G and its future in Telecoms domain but, I guess, he was least aware that he could have easily skipped those topics. As he went through his slide show one guy was busy with his GPRS enabled phone and another one revving his BMW-Mini in a mobile game.
It's very difficult to believe that I am yet to find a reason pragmatic enough behind this KYI initiative. There must be one, at least!. One reason which must have prompted my top management for such a decision; one justification to take such a step. If you find any possible reason, please leave a comment and let me know. Thanks in advance.
Apparently, top management of my employer, which happens to be one of the largest IT service provider in India, doesn't thinks so. Recently, there was an initiative driven by our industry lead; the so called "initiative" christened as Know Your Industry, aka 'KYI', desired to imbibe all of the resources with sound knowledge of its domain. These KYI sessions and trainings spanned from basic information, evolution and future of industry, various technologies, frameworks, processes et al related to our industry. The initiative mandated all resources (my estimate is that the total number of resources is not less than four thousand odd people) to go through the trainings and sessions. No doubt all these pieces of information passed on through this initiative were pretty good but at the same time they were redundant and also obsolete in some cases, at least from my perspective. The whole package demanded at least one full day for one average resource to read/attend sessions, understand and assimilate the information. Which means that the investment in terms of man-hour was around 4000X8 units (leave aside the cost of planning and execution from management side); that's a huge figure going down the drains when not more that 5 percent of the total effort is going to bear fruits (I might be having a lot of free time to write a blog or surf around but there are scores of people who do, apart from the regular work, stretch assignments and support their applications). Kindly note that i am not against fruitful trainings; trainings are good and a crucial tool to keep yourself updated with the industry and to learn new stuffs, and trainings should be guided by ones project and personal development needs.
Most of us understand the significance of trainings. We try to relate trainings with the outcome which can be derived from it, so when a resource finds that the management mandated training is nowhere related to his daily work and responsibility and even doesn't falls in line with his/her personal learning's keenness then the resource loses all affinity to that training. This results in failure of the whole purpose- the purpose behind training people. Moreover, knowledge without implementation is of no use; if I know the intricacies of my industry, say Telecoms, but I am unable to leverage that knowledge due to lack of scope, then the knowledge is as good as nothing. Hence the whole KYI seems to be redundant.
Not only did the KYI seems redundant, it was also obsolete in some cases. During one of the session, the instructor was talking about convergence and 3G and its future in Telecoms domain but, I guess, he was least aware that he could have easily skipped those topics. As he went through his slide show one guy was busy with his GPRS enabled phone and another one revving his BMW-Mini in a mobile game.
It's very difficult to believe that I am yet to find a reason pragmatic enough behind this KYI initiative. There must be one, at least!. One reason which must have prompted my top management for such a decision; one justification to take such a step. If you find any possible reason, please leave a comment and let me know. Thanks in advance.
Thursday, May 8, 2008
Rx: Amnesia Specialist
The recent statements given by Mr. Bush on the contribution of rapidly developing nations, like India , in the current global food crisis has caused a lot of indignation among Indians, especially our trustworthy politicians- no pun intended. I wonder if this emotion shown by our netas (politicians) is intended to save nation's pride and self-respect or its just another gimmick to strengthen the forthcoming election base. One feels that Mr. Bush is not incorrect in assessing the growth of these two economies. Of course when a country, especially like India and China, prospers, it is expected to raise the overall consumption. Not only due to the high population growth rate but also due to the momentous development of these two giants; in India's case millions of families, who were under poverty line decades ago are now making progress and egressing from poverty and malnutrition. Certainly, one would not hesitate to state that our consumption, rice and wheat being staple food, is increasing rapidly. Alleviation of millions of families resulted in such demand and one feels happy about that.
It's a very known fact that US consumes one of the largest chunk of any global resource, not only food; one does not understands why our netas started behaving like a five year old kid, got so emotional about the statements made by Bush and started retaliating with all kinds of data, just to prove that US is the consumes more than India. Bush neither passed any judgement on India's steep consumption growth, he was just stating facts, nor did he denied or distorted any fact. Having said that, one does not mean that that's the end of the matter. The part that came unjust from Mr. Bush's side was that he did not made any other statement; any other statement that was as correct as the one he made. One would definitely like to ask a question to Mr. Bush- does he suffers from amnesia? Why is he trying to sideline those facts which are more profound in causing the global food shortage.
Did Mr. Bush forgot that last year he redirected one-fifth of US corn harvest to produce bio-fuel? Apparently, he does not realize that this step was a major precursor to the crisis of corn in global market, which resulted in unprecedented price hike in all the cereals. Not only the price hike, Mr. Bush also fostered an environment which lead to deforestation of amazon, in Brazil. Yes Mr. Bush, you read it right! As you siphoned out a big chunk of your corn harvest to produce bio-fuel, the demand of corn increased in your domestic market, due to this a lot of your soybean producing farmers stopped soy cultivation and started producing corn, certainly to earn the windfall profit. This is turn reduced the supply of soybean in your domestic market and to fulfill this demand you started importing heavily from Brazil; consequently, Brazilian people started cutting down amazon forest to build new farmlands, in order to meet the additional demand coming from US. FYI, deforestation is not good for global warming. Moreover, world needs next generation bio-fuel technology. The current one, boosted and boasted by your so called bio-fuel revolution, is doing no good to the planet. Research shows that the current technology is not a viable one and is inefficient; it does not helps in anyway to reduce atmospheric pollution. Moreover, the fact that the amount of input required to fill a SUV tank is enough to feed a person for 365 days, hits heavily to your bio-fuel drive. Not to mention the fact that an average American consumes many times more than an Indian, leave alone the downtrodden African nationals; 31% of Americans are obese with a BMI in excess of 30. The middle class of India, whom you branded as the prime reason behind all this food fiasco, will be able to teach you the meaning of frugality, which you desperately need. Once you know that ground reality, you might be interested to have their guidance; we will be more than happy to help you out.
I am pretty much sure that you are aware of all these facts, but the only problem with you is that your forget too early. In the year 2003, you forgot the meaning and significance of sovereignty and international law before striking Iraq and now you not only forget to state the major facts before stating the minor ones but also brazenly point out your fingers to others. You need urgent medical attention Mr. Bush, please do not forget that; if you do, it would be a blasphemy against humankind!
It's a very known fact that US consumes one of the largest chunk of any global resource, not only food; one does not understands why our netas started behaving like a five year old kid, got so emotional about the statements made by Bush and started retaliating with all kinds of data, just to prove that US is the consumes more than India. Bush neither passed any judgement on India's steep consumption growth, he was just stating facts, nor did he denied or distorted any fact. Having said that, one does not mean that that's the end of the matter. The part that came unjust from Mr. Bush's side was that he did not made any other statement; any other statement that was as correct as the one he made. One would definitely like to ask a question to Mr. Bush- does he suffers from amnesia? Why is he trying to sideline those facts which are more profound in causing the global food shortage.
Did Mr. Bush forgot that last year he redirected one-fifth of US corn harvest to produce bio-fuel? Apparently, he does not realize that this step was a major precursor to the crisis of corn in global market, which resulted in unprecedented price hike in all the cereals. Not only the price hike, Mr. Bush also fostered an environment which lead to deforestation of amazon, in Brazil. Yes Mr. Bush, you read it right! As you siphoned out a big chunk of your corn harvest to produce bio-fuel, the demand of corn increased in your domestic market, due to this a lot of your soybean producing farmers stopped soy cultivation and started producing corn, certainly to earn the windfall profit. This is turn reduced the supply of soybean in your domestic market and to fulfill this demand you started importing heavily from Brazil; consequently, Brazilian people started cutting down amazon forest to build new farmlands, in order to meet the additional demand coming from US. FYI, deforestation is not good for global warming. Moreover, world needs next generation bio-fuel technology. The current one, boosted and boasted by your so called bio-fuel revolution, is doing no good to the planet. Research shows that the current technology is not a viable one and is inefficient; it does not helps in anyway to reduce atmospheric pollution. Moreover, the fact that the amount of input required to fill a SUV tank is enough to feed a person for 365 days, hits heavily to your bio-fuel drive. Not to mention the fact that an average American consumes many times more than an Indian, leave alone the downtrodden African nationals; 31% of Americans are obese with a BMI in excess of 30. The middle class of India, whom you branded as the prime reason behind all this food fiasco, will be able to teach you the meaning of frugality, which you desperately need. Once you know that ground reality, you might be interested to have their guidance; we will be more than happy to help you out.
I am pretty much sure that you are aware of all these facts, but the only problem with you is that your forget too early. In the year 2003, you forgot the meaning and significance of sovereignty and international law before striking Iraq and now you not only forget to state the major facts before stating the minor ones but also brazenly point out your fingers to others. You need urgent medical attention Mr. Bush, please do not forget that; if you do, it would be a blasphemy against humankind!
Tuesday, May 6, 2008
Wana trade CO2 ?
Miscalculations and over-confidence seems to be the prime reasons behind the ongoing US financial crisis. Chance of committing an error, grave mistakes in the case of US housing crisis, gets compounded when one deals with complex financial instruments and evidently, the price which we all have to pay is too dear. Its definitely going to take few more quarters for US to come out of this slowdown, probably a recession. It's very bewildering to see intellectuals coming up with such complex instruments and regulations which are so difficult to comprehend for a layman like me. One of the recent entry to the list of global financial instruments is Carbon crediting i.e. trading carbon ( actually it is carbon di-oxide, CO2) . Carbon credit as a commodity is a newcomer and its current global market is estimated to be around USD $60 million. Moreover, if all the major economic powers ratifies the Kyoto Protocol, this market is estimated to cross a trillion US dollar mark by the year 2020.
The way carbon trading works is very intriguing - and it's a very laudable and noble way to mitigate global warming and might prove very helpful to humankind to avert a premature doomsday. Carbon trading is based under the premise of 'cap-and-trade' policy. With the ratification of Kyoto protocol, the amount of green house pollutants a firm, and hence a country, can emit is calculated and that sets the 'cap' for the organisation, subsequently for a country too, and it is obliged not to cross the upper limit. Now the question is, how firms or organisations are expected to grow, which is fundamental to any country's growth, without polluting earth's atmosphere further. To answer this questions comes the part of 'trade'; by purchasing carbon credits a firm can keep its net emission level under the predetermined capped level and hence continue emitting more pollutants. A carbon credit is nothing but the point which one earns by not emitting carbon di-oxide (CO2) in the atmosphere. Among all the green house gases CO2 is the most abundant one hence the standards are set based on it. So whenever one makes use of any technology and prevents emission of CO2 or helps reducing CO2 level, one earns points. Even if one uses a CFL instead of a conventional bulb, one earns carbon credits. It's another point that the total carbon credits which one will accumulate, with the help of one CFL, might not be significant enough to trade as commodity in actual market. It takes preventing one metric tonne of CO2 from escaping to atmosphere, to earn a Certified Emission Reduction (CER), the unit of one carbon point. It might look like a colossal quantity but it gets dwarfed when emissions of fuel guzzling firms, such as thermal power plant, are taken into consideration. Hence, if a firm wants to pollute more than the capped limit it must purchase carbon credits from other organisations and/or banks. Purchasing carbon credit means that the organisation has supposedly compensated the damage which it is going to inflict, by promoting some other environment preserving process. To me, it seems more like a 'heal-and-hit' policy as one helps in healing the environment before hitting it again - sounds very unethical but it's showing positive results and hopefully it continues to works out well in future.
There are many organisations which collect carbon credits from small firms and sell them to banks. Small firms might earn their points by using technologies as simple as non-conventional energy sources or even by preventing their livestock from belching or farting methane ( seriously! people are using pills on livestock to prevent emission of methane, which is more than 20 times effective green house gas compared to CO2. Also note that, HFC's, used as refrigerant are 3000 times effective and one metric tonne of HFC costs around USD $12000). Currently, in the lower rung, the cost of 1 CER is USD $4 and these CER's are sold at a rate many times higher to investment banks; and finally to firms by these banks at a much higher rate. This created a market in which CER's are traded and its potential is estimated to be huge, hence investment banking giants like JP Morgan Chase, UBS are heavily banking on carbon trading as one of the hedging instrument.
One feels that, carbon trading is not only playing an instrumental role in subduing global warming but also created a new commodity which can be traded in free market. Now there are more than one thing to watch; first, how effective will be to preserve earth's atmosphere and second, how this new commodity unfolds in the future of world economy. One hopes that it won't result to a crisis like the one which housing sector is currently facing.
The way carbon trading works is very intriguing - and it's a very laudable and noble way to mitigate global warming and might prove very helpful to humankind to avert a premature doomsday. Carbon trading is based under the premise of 'cap-and-trade' policy. With the ratification of Kyoto protocol, the amount of green house pollutants a firm, and hence a country, can emit is calculated and that sets the 'cap' for the organisation, subsequently for a country too, and it is obliged not to cross the upper limit. Now the question is, how firms or organisations are expected to grow, which is fundamental to any country's growth, without polluting earth's atmosphere further. To answer this questions comes the part of 'trade'; by purchasing carbon credits a firm can keep its net emission level under the predetermined capped level and hence continue emitting more pollutants. A carbon credit is nothing but the point which one earns by not emitting carbon di-oxide (CO2) in the atmosphere. Among all the green house gases CO2 is the most abundant one hence the standards are set based on it. So whenever one makes use of any technology and prevents emission of CO2 or helps reducing CO2 level, one earns points. Even if one uses a CFL instead of a conventional bulb, one earns carbon credits. It's another point that the total carbon credits which one will accumulate, with the help of one CFL, might not be significant enough to trade as commodity in actual market. It takes preventing one metric tonne of CO2 from escaping to atmosphere, to earn a Certified Emission Reduction (CER), the unit of one carbon point. It might look like a colossal quantity but it gets dwarfed when emissions of fuel guzzling firms, such as thermal power plant, are taken into consideration. Hence, if a firm wants to pollute more than the capped limit it must purchase carbon credits from other organisations and/or banks. Purchasing carbon credit means that the organisation has supposedly compensated the damage which it is going to inflict, by promoting some other environment preserving process. To me, it seems more like a 'heal-and-hit' policy as one helps in healing the environment before hitting it again - sounds very unethical but it's showing positive results and hopefully it continues to works out well in future.
There are many organisations which collect carbon credits from small firms and sell them to banks. Small firms might earn their points by using technologies as simple as non-conventional energy sources or even by preventing their livestock from belching or farting methane ( seriously! people are using pills on livestock to prevent emission of methane, which is more than 20 times effective green house gas compared to CO2. Also note that, HFC's, used as refrigerant are 3000 times effective and one metric tonne of HFC costs around USD $12000). Currently, in the lower rung, the cost of 1 CER is USD $4 and these CER's are sold at a rate many times higher to investment banks; and finally to firms by these banks at a much higher rate. This created a market in which CER's are traded and its potential is estimated to be huge, hence investment banking giants like JP Morgan Chase, UBS are heavily banking on carbon trading as one of the hedging instrument.
One feels that, carbon trading is not only playing an instrumental role in subduing global warming but also created a new commodity which can be traded in free market. Now there are more than one thing to watch; first, how effective will be to preserve earth's atmosphere and second, how this new commodity unfolds in the future of world economy. One hopes that it won't result to a crisis like the one which housing sector is currently facing.
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