By 2030, India will be the biggest carbon market in the world, Abhay Bakre, Director General, Bureau of Energy Efficiency, has said. The BEE, a government body, will administer India’s carbon trading, which is to be rolled out soon.
Bakre has made this point in a press release issued to provide information about a recent study by the World Resources Institute (WRI) on carbon markets in India.
Bakre was quoted saying, “if aggressive efforts to mitigate emisisons are to be achieved, carbon markets are one of the most effectie tools to do that.”
Referring to the recent amendments in the Energy Conservation Act, Bakre has said, “We will make sure that the Indian market is on par with international standards.” He said that the BEE is building a “pool of verifiers and a robust electronic platform to register projects and manage credits.”
What are carbon markets?
Carbon markets refer to trading in carbon credits. Carbon credits are electronic instruments issued for efforts to reduce carbon dioxide emissions against a baseline or efforts to suck up carbon dioxide from the atmosphere. The owners of the credits sell them to those obligated to reduce carbon dioxide emissions but are unable to do so by their own efforts.
While Indian companies have been for many years generating and selling carbon credits, their buyers have always been abroad. India is working towards building a fully domestic carbon market, where both buyers and sellers are Indian entities.
In December last year, the Parliament passed the Energy Conservation (Amendment) Bill, 2022. The Bill amended the Energy Conservation Act, 2001, to empower the Government to establish carbon markets in India and specify a carbon credit trading scheme.
On February 17, the Government announced a list of 13 activities that will be considered for the trading of carbon credits under Article 6.2 mechanism to facilitate transfer of emerging technologies and mobilise international finance in India.
Against this backdrop, the World Resources Institute, “a not-for-profit, global research organisation that works with governments, businesses, multilateral institutions, and civil society groups to develop practical solutions” has come out with a report, based on its own ‘carbon market simulation’ study of 2020-21. The simulation study pretended that 21 large Indian businesses, representing 10 per cent of India’s industry emissions did everything required to earn and sell carbon credits—such as baseline and target setting, measurement, reporting and verification, and trading.
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With this simulation, the WRI study demonstrated that the carbon market brought down emissions reduction costs by 28 per cent. The findings of the study were shared with official engagement groups of G20, in Mumbai recently.
“With a carbon market, India has at its disposal an instrument that can provide the right policy and price signals to incentivise deep decarbonisation from the industry sector while ensuring global competitiveness,” says Ashwini Hingne, Senior Manager, WRI, who led the research, in the press release.
“Our analysis shows that a well-designed carbon market can potentially also reduce costs of emissions reductions and mobilise finance needed for decarbonisation of the MSME sector,” he said.
“India’s carbon market can give businesses a clear policy signal to shift investments toward low carbon technology,” says Ulka Kelkar, Director of the Climate Program at WRI, in the release. “This should also be accompanied by an emissions reporting program and targeted capacity building to prepare Indian industry.”