Abstract: Greenhouse gases, CO2 Dioxide Carbon; CH4 Methane, Nitrous Oxide N2O, HFCs Hydro fluorocarbons; Perfluorocabonos and PFCs and SF6 Sulfur Hexafluoride cause global warming. Since CO2 is the dominant greenhouse gas, these are generally referred to as Carbon gas. In order to save the world from global warming, United Nations Framework Convention on Climate Change (UNFCCC) was adopted in 1992 and Kyoto Protocol was signed in 1997 as a follow up measure, which came into force from 2005. Kyoto Protocol fixed ceilings on the emission of green house gases (GHGs) by the developed countries. These countries have set limits to GHG emissions by their own industries and others. The European Union Emissions Trading Scheme (EUETS) is the main pillar of the European Union in meeting its commitments under the Kyoto Protocol. Three market based mechanisms have been designed to encourage the reduction of green house emissions, which are (1) Clean Development Mechanism (CDM), (2) Joint Implementation (JI), (3) International Emission Trading (IET). The developed countries which are bound to reduce their emissions can discharge their commitments by purchasing the Carbon Emission Reduction entitlements (CERs) from the other countries which have implemented green house gas reduction projects. The CERs or carbon credits are traded in the international and Indian commodity exchanges at market determined prices. In India, Multi Commodity Exchange (MCX) has become the first Asian exchange to trade in carbon credits. It has been reported that about 300 Indian companies are already trading in carbon credits in MCX. This study analyses the factors which can affect carbon trading and hence, the future green house gas emission.