Indian Government Explains How the Indian Carbon Market Works and Goals
- Muhammad Ahmad
- Dec 10, 2024
- 2 min read
The Indian Carbon Market aims to help decarbonize the economy by pricing greenhouse gas emissions
Key steps outlined to achieve India's climate goals through carbon credit trading
The Indian government has laid a comprehensive Carbon Credit Trading Scheme (CCTS) framework.
The scheme includes both compliance and offset mechanisms to reduce greenhouse gas emissions.
India’s transition plan from the Perform, Achieve, and Trade (PAT) scheme to CCTS ensures smooth implementation.
India has made significant progress decoupling its economic growth from greenhouse gas emissions, as outlined in its Third National Communication (TNC) to the UNFCCC in December 2023. According to the report, India has successfully reduced its emission intensity over the years, with a 33% reduction by 2019 compared to 2005. To further this progress, the government introduced the regulatory framework for the Indian Carbon Market in 2022, establishing the Carbon Credit Trading Scheme (CCTS) as part of its climate goals.
This market-based initiative is expected to play a crucial role in helping India meet its enhanced Nationally Determined Contributions (NDCs) under the Paris Agreement. By introducing a carbon pricing system through carbon credit certificates, the government aims to decarbonize key sectors of the economy. The CCTS includes a compliance mechanism for obligated entities and an offset mechanism for non-obligated entities to register emission reduction projects.
Technical Focus
The Indian Carbon Market, as outlined under the CCTS, will drive emission reductions in energy-intensive sectors like aluminium, cement, steel, and petrochemicals. The Bureau of Energy Efficiency has developed an MRV (Measurement, Reporting, and Verification) framework to ensure transparency and credibility in the carbon credit process. This framework requires annual verification of greenhouse gas emissions data and will be supported by accredited Carbon Verification Agencies.
The government has developed a detailed plan to transition energy-intensive industries from the Perform, Achieve, and Trade (PAT) scheme to the CCTS. This ensures that targets are met consistently while avoiding duplication of efforts. Industries such as cement, steel, and textiles are among the first to be included under the CCTS.
Union Minister of State for Environment, Forest and Climate Change, Shri Kirti Vardhan Singh, confirmed these developments in a written reply to the Lok Sabha, outlining the government's ongoing commitment to climate action through a market-driven approach.