Through a gazette notification, the union government of India has approved India's first domestic regulated carbon market under the Carbon Credit Trading Scheme on July 1, 2023. The scheme also entails the formation of a National Steering Committee which will govern the functioning of the Indian carbon market.
The National Steering Committee has been entrusted with crucial responsibilities pertaining to the establishment and consolidation of the Indian carbon market. Its primary role involves providing expert recommendations for the development and finalization of procedures essential for the institutionalization of this market. These procedures encompass formulating specific greenhouse gas emission targets for entities obligated to comply, as well as guidelines governing the trading of carbon credit certificates outside of India.?
Furthermore, the committee is authorized to oversee the issuance of carbon credit certificates and play a pivotal role in designing the processes and conditions relating to the crediting period, renewal, or expiry of these certificates. It is also entrusted with the crucial task of monitoring the operations and functions of the Indian carbon market.?
1. Carbon credit is a financial instrument that represents the reduction or removal of greenhouse gas (GHG) emissions from the atmosphere. It is a unit of measurement used to quantify the amount of carbon dioxide or other greenhouse gases that have been offset or mitigated by a project or activity.?
2. The concept of carbon credits is based on the principle that the emission of GHGs contributes to climate change and global warming. To address this issue, countries and organizations have adopted mechanisms such as carbon trading and carbon offsetting. Carbon credits play a central role in these mechanisms.
3. When a project or activity reduces or avoids the emission of greenhouse gases, it can generate carbon credits. These credits can be traded or sold on the carbon market. The buyer of the credits can then use them to offset their own emissions. This allows organizations or individuals to take responsibility for their carbon footprint by investing in projects that reduce emissions elsewhere.?
4. Each carbon credit typically represents one metric ton of carbon dioxide or its equivalent in other greenhouse gases.?
5. The purpose of carbon credits is to create economic incentives for reducing greenhouse gas emissions and promoting sustainable practices. By placing a financial value on carbon emissions, carbon credits encourage businesses and individuals to invest in emission reduction projects, ultimately contributing to the global effort to combat climate change.
1. Enhanced Climate Action: It allows the government to set clear emission reduction targets and create a market-based mechanism for achieving those targets. By putting a price on carbon and establishing a trading system, it encourages companies and industries to actively participate in emission reduction efforts.
2. Cost-effective Emission Reduction: A regulated carbon market provides a cost-effective approach to achieving emission reduction goals. It allows companies to choose the most efficient and economically viable options for reducing their emissions. By trading carbon credits, companies that can achieve emission reductions at a lower cost can sell excess credits to those facing higher costs, ensuring that emission reductions are achieved at the least overall cost to the economy.
3. Promoting Innovation and Investments: A regulated carbon market stimulates innovation and investment in clean technologies and sustainable practices. It provides a financial incentive for companies to invest in research and development of low-carbon solutions, energy efficiency measures, and renewable energy projects. This, in turn, fosters economic growth, job creation, and the development of a green economy.
4. Encouraging Compliance and Accountability: A domestic regulated carbon market establishes a transparent and accountable system for tracking, reporting, and verifying emission reductions. It encourages companies and industries to measure and report their emissions accurately, ensuring transparency and accountability in their climate-related activities. This promotes a culture of compliance with emission reduction targets and strengthens the credibility of India's climate commitments.
5. Facilitating Policy Integration: A regulated carbon market can facilitate the integration of climate change mitigation efforts into broader policy frameworks. It provides a mechanism to align various sectoral policies, such as energy, transportation, and industry, with climate goals. By incorporating carbon pricing and trading into policy decision-making, it ensures that climate considerations are mainstreamed across different sectors of the economy.
6. International Cooperation and Linkages: The establishment of a domestic regulated carbon market enables India to engage in international carbon market mechanisms and linkages. It opens avenues for international cooperation, such as participating in international carbon trading schemes or connecting with other national carbon markets. This can provide additional opportunities for India to access finance, technology, and expertise, and to contribute to global emission reduction efforts.