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India’s Role in the Global Carbon Credit Market: An Emerging Leader?

India’s Role in the Global Carbon Credit Market: An Emerging Leader?

India, with its rapid economic growth and increasing focus on sustainability, is emerging as a significant player in the global carbon market. As the carbon markets have become an essential tool in incentivizing emissions reduction and channeling investments into green technologies, India has strategically positioned itself to not only meet its climate commitments but also capitalize on the economic opportunities that the global carbon trading landscape offers. With ambitious goals for energy efficiency, renewable energy, and emissions reductions, India is taking significant strides towards becoming a low-carbon economy.

The introduction of a domestic carbon trading market, along with the growing demand for carbon credits across industries, highlights India’s potential to influence both regional and global climate action strategies. As India strengthens its regulatory framework and continues to attract investments in sustainable projects, it has the chance to solidify its position in the international carbon market. Whether India can fully realize this potential will depend on overcoming challenges such as infrastructure development and market volatility, but its trajectory suggests it could shine bright in the global arena.

India’s Commitment to Climate Action

India’s dedication to addressing climate change is clearly reflected in its Nationally Determined Contributions (NDCs) under the Paris Agreement. India has successfully met two key Nationally Determined Contribution (NDC) targets well ahead of the 2030 deadline. These include: a reduction in the emissions intensity of its GDP by 33–35% from 2005 levels, and achieving 40% of its total installed electricity capacity from non-fossil fuel sources.

As of October 31, 2023, the share of non-fossil fuel-based energy in the country’s total installed capacity had reached 186.46 GW, accounting for 43.81% of the overall capacity. Additionally, according to India’s third National Communication to the UNFCCC (submitted in December 2023), the emissions intensity of GDP fell by 33% between 2005 and 2019.

In an updated NDC submitted in August 2022, India raised its ambition: it now aims to reduce GDP emissions intensity by 45% from 2005 levels by 2030 and increase the share of non-fossil fuel-based energy to 50% of its installed capacity by the same year. These commitments position India as a significant player in global climate policy discussions, as it strives to balance growth with environmental responsibility.

India’s strides in renewable energy are particularly noteworthy. As of October 10, 2024, the nation’s renewable energy capacity surpassed 200 GW, marking a major achievement in its clean energy transition. This milestone highlights India’s growing commitment to sustainable energy sources and its efforts to build a more environmentally friendly energy infrastructure. The country’s investments in solar power, wind farms, and hydropower projects are significantly reducing its reliance on fossil fuels, while simultaneously bolstering energy security.

In addition, initiatives like the National Green Hydrogen Mission, PM-KUSUM, PM Surya Ghar and various Production-Linked Incentive (PLI) schemes for solar PV modules reflect the government’s strategic approach to expanding clean energy capacity and reducing fossil fuel dependence. With a goal of reaching 500 GW of non-fossil fuel-based energy by 2030, India is positioning itself as a global leader in renewable energy. These efforts represent a comprehensive strategy not only aimed at meeting the country’s energy needs but also at tackling the broader challenges of climate change and sustainable resource management.

Carbon Credit Trading Scheme (CCTS)

Saurabh Diddi, Director at the Bureau of Energy Efficiency, the key agency responsible for shaping and implementing India’s carbon markets, recently announced that the country is targeting a 2026 launch for its Carbon Credit Trading Scheme (CCTS). The scheme will feature both a mandatory compliance framework and voluntary offset credits, with plans for it to be fully operational by 2026. A domestic carbon trading market will allow Indian companies to buy and sell carbon credits within the country, thus creating a dynamic pricing mechanism for carbon emissions and incentivizing emissions reductions across industries.

India recently published a draft regulation for public consultation aimed at launching a Carbon Credit Trading Scheme (CCTS). This new scheme will evolve from the existing Perform, Achieve, and Trade (PAT) programme, a mandatory energy efficiency initiative covering 13 sectors, into a baseline-and-credit system. The proposed framework will allow both obligated and non-obligated entities to buy and sell carbon credit certificates through a power exchange.

A Leap Forward

In October, the BRICS nations – Brazil, Russia, India, China, and South Africa released the Kazan Declaration, which announced the adoption of a Memorandum of Understanding (MoU) aimed at exploring market cooperation under Article 6 of the Paris Agreement. The declaration emphasized the significant role of carbon markets in driving climate action and called for enhanced collaboration and knowledge sharing among member countries. It also expressed opposition to unilateral climate measures and reaffirmed the commitment to coordinated efforts in addressing climate challenges. Furthermore, the MoU introduced the BRICS Carbon Markets Partnership, a platform for exchanging experiences and discussing potential cooperation on carbon markets within the group. The establishment of the Contact Group on Climate Change and Sustainable Development, along with the upcoming BRICS Climate Research Platform, will facilitate the exchange of scientific expertise, while also focusing on practical climate solutions, renewable energy, sustainable finance, and low-emission technologies.

A Bright Future

India stands at a pivotal moment in its journey towards becoming a global leader in the carbon credit market. With its ambitious climate targets, rapid renewable energy growth, and the upcoming launch of the Carbon Credit Trading Scheme (CCTS), India is poised to make substantial contributions to global climate action. By leveraging its strong regulatory frameworks and fostering international cooperation, India can not only meet its own environmental goals but also play a crucial role in shaping the future of global carbon markets. With continued investments in sustainability and overcoming key challenges, India has the potential to emerge as a shining example of how developing economies can drive meaningful climate change solutions.

 

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