The high aspirations that the Indian green energy-based companies had nurtured for generating additional resources through carbon trading have begun to fade. Their Chinese counterparts have out-smarted them by wooing away customers, largely from the European Union (EU), and forcing them to search for new buyers and even opt for lower prices. Though India, on paper, is still the second largest seller of carbon credits, its market share, reckoned in 2007 at an abysmal 6 per cent, looks insignificant when compared with the 73 per cent market share enjoyed by China. The global carbon market in 2007 grew, significantly, to $64 billion from around $33 billion in the previous year. The World Bank report on the "state and trends of the carbon market 2008", which has unveiled these facts, has also indicated that it is the third consecutive year that China has retained its numero uno status while India has been faring indifferently in terms of transacted volumes of certified emission reductions (CERs) which are traded globally under the clean development mechanism (CDM) mooted under the United Nations Framework Convention on Climate Change (UNFCCC). What indeed should make the country and, more so, the potential CER sellers, sit up is that though nearly one-third of the total CDM projects registered with the UNFCCC are from India, the buyers prefer to source their requirement from China rather than India. One reason for this could be that China has gone in for large-sized companies generating CERs in bulk, which the large buyers prefer, while the Indian companies are usually small sellers without any bargaining power. Besides, the Indian sellers do not really understand the complexities of this highly volatile market in a novel intangible commodity. Nor do they usually opt for hedging their risks through options trading on the global commodities exchanges. The local exchanges, in any case, are not yet allowed to offer options trading. Moreover, the country has not yet been able to decide whether CERs are goods or services and whether their sales abroad should be treated as exports of goods or services. Such issues, obviously, need to be addressed without any loss of time because the carbon market may not remain the same for long. It is now being increasingly realised that this mode of CDM is neither an efficient way of ensuring reduction in the emission of environment-unfriendly greenhouse gases (GHGs) nor is it helping in achieving the goal of reversing the process of global warming and climate change to the desired level. It can, at best, be viewed as a politically convenient and cost-effective way out, conceived by the rich countries to let their industry continue to pollute the environment even while meeting the mandatory emission reduction obligations by buying the carbon credits from the poor countries. No wonder then that while the value of the traded carbon has nearly doubled in the past one year, the actual GHGs emission reduction has been just about 7 per cent. Even the European Union (EU), which accounts for nearly two-thirds of the global carbon market, has seen through it. Consequently, the EU has mooted a proposal in the ongoing talks on drawing up a successor to the Kyoto Protocol on climate change, which is expiring in 2012. The proposal seeks to put a cap on CER purchases from India and China unless these countries also take on mandatory sector-specific energy-efficiency targets. Though India and other developing countries, relying heavily on coal and conventional fuels for their economic development, are unlikely to accede to this demand, the going is bound to get tough for them. So the best course for India Inc., especially the small CDM companies, is to make the best of the present opportunity by pooling together their CERs to attract big buyers. This approach can help them even in the future to adapt to whatever new form the carbon trading takes under the post-Kyoto pact on climate change.