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Fair trade: On the 29th COP and India’s carbon market
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Context
The upcoming 29th edition of the Conference of Parties (COP) in Baku, Azerbaijan, is generating renewed interest in accelerating India’s transition to carbon markets. With a focus on increasing climate finance ambition, clarity on carbon markets is a key agenda item, particularly concerning Article 6 of the Paris Climate Agreement. This section outlines the framework for enabling trading of carbon credits among countries to incentivize climate action.
Carbon Market Potential
- Carbon Credit Mechanism: Carbon markets allow countries to trade carbon credits derived from greenhouse gas reductions, incentivizing actions like transitioning to renewable energy and conserving forests.
- India's Strategic Advantage: India's commitment to sourcing 50% of its electricity from non-fossil sources by 2030 positions it favorably to host numerous carbon-reduction projects, enhancing its role in global carbon markets.
- Emerging Private Sector Initiatives: A rise in private sector initiatives focused on innovative forestry projects in India is creating opportunities for carbon credits, which can be traded through voluntary carbon markets by multinational companies.
Regulatory Challenges Ahead
- Emission Intensity Standards: India's iron and steel sectors are expected to adhere to emission intensity standards by 2025, marking a significant step toward formalizing the carbon market in the country.
- Complex Compliance Calculations: The implementation of emission standards will involve intricate calculations regarding carbon savings, potentially hindering effective compliance and pressure on companies to meet their targets.
- Need for Transparent Policies: To ensure successful integration into global carbon markets, India must develop transparent and equitable policies that align with international best practices, leveraging its research institutions for effective guidance.
Practice Question
Q. Discuss the significance of Article 6 of the Paris Climate Agreement in the context of India’s transition to carbon markets. What challenges does India face in implementing effective carbon credit mechanisms?
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