Giving Shape to India’s Carbon Credit Mechanism

Context

• COP29 is placing a strong emphasis on climate finance, focusing especially on the carbon credits framework.
• There is an ongoing debate between developed and developing countries regarding carbon credits.
• India has prioritized a domestic carbon market in its updated Nationally Determined Contributions (NDCs) in 2023 as part of its climate strategy.
• To make this market effective, India must learn from global experiences to ensure credibility, efficiency, and fairness.

Understanding Carbon Credits and India’s Initiatives

Carbon Credit Mechanism

• Carbon credits represent measurable reductions in greenhouse gas emissions and can be traded or sold to incentivize emission reductions.
• For the market to contribute effectively to emission reductions, the integrity of carbon credits is essential.
• Without stringent standards, carbon credits risk becoming tools for greenwashing, where companies appear eco-friendly without making real reductions.

India’s Initiatives

• India’s 2023 NDCs highlighted establishing a domestic carbon market as part of its climate commitments.
• The Energy Conservation (Amendment) Act of 2022 introduced a Carbon Credit Trading Scheme (CCTS), giving a legal framework to the market.
• This initiative aligns with India’s Paris Agreement commitments and broader economic goals.
• India must incorporate global best practices to ensure the market’s credibility and long-term success.

Challenges in the Carbon Credit Mechanism and Ensuring Integrity

Greenwashing and Additionality Concerns

• Greenwashing:

  • Many voluntary carbon markets (VCMs) globally suffer from greenwashing due to lax standards.
  • In sectors like forestry, projects sometimes overstate environmental benefits.
  • India’s Green Credit Programme (GCP) has faced similar issues, with criticisms about non-scientific methods in tree planting projects.

• Additionality:

  • A key criterion for credible credits is additionality—reductions that would not occur without the project.
  • Without strict additionality standards, credits might be awarded to projects with no real emissions impact, undermining the market.

Measures to Strengthen Integrity

• Implement stringent verification standards in India’s carbon credit system.
• Establish a national registry to prevent double-counting of carbon credits, ensuring each credit represents a real reduction.
• Transparency through accurate tracking will build stakeholder confidence in the market.

Learning from International Best Practices

• India should follow international standards set by organizations like the International Emissions Trading Association (IETA) and Gold Standard.
• The Gold Standard emphasizes additionality, permanence, and sustainability for credible carbon credits.
• Adopting such best practices will help India’s market align with global expectations, facilitating international trade of carbon credits.

Additional Measures for Long-Term Success

Alignment with Global Standards and Article 6 of the Paris Agreement

• India’s carbon market must align with Article 6 of the Paris Agreement, which allows for international emissions trading.

• Article 6.2 facilitates Internationally Transferred Mitigation Outcomes (ITMOs), making it essential for India to comply with these guidelines.

• Prevention of Double-Counting:

  • Mechanisms to prevent double-counting are essential for credibility.
  • Transparent systems for tracking emissions reductions will align India’s market with global standards.

Emphasizing Transparency and Disclosure

• Transparency is crucial to building trust in India’s carbon market.
• India should provide detailed disclosures on carbon reduction methods, project standards, and third-party verification reports.
• A centralized platform for data access will ensure public trust in the emissions reductions claimed.
• Independent audits by certified bodies, such as India’s Bureau of Energy Efficiency (BEE), will further verify the sustainability of projects.
• Real-time tracking of credit transactions will improve accountability and provide insights into each project’s environmental impact.

Conclusion

• India’s carbon credit market is in its early stages, and its success depends on strict enforcement and alignment with international and domestic goals.
• By focusing on transparency and maintaining rigorous standards of integrity, India can create a robust carbon market.
• A credible market will help India achieve its climate finance goals and support sustainable development objectives.