The emergence of global warming has led to the development of carbon (C) trading, where businesses and countries buy and sell C permits to reduce C emissions. This approach is commonly used by nations to meet their commitments under the international Kyoto Protocol (KP) of the United Nations Framework Convention on Climate Change, which aims to reduce C emissions and address future climate changes, focusing on carbon dioxide (CO2) equivalent units. India ratified the KP in August 2002, with some exceptions but also potential benefits from technology transfer and foreign investments. Initially, India performed well in the C market as an early participant, but its performance declined after China entered the market in 2005. This article examines C trading, its operation, and its potential to reduce global emissions, as well as analyzes the future outlook of the C trading sector.