Government plans to develop Indian Carbon Market (ICM)

The Union Ministry for Power is going to develop a Carbon Credit Trading Scheme (CCTS) for decarbonisation in partnership with the Ministry of Environment, Forests and Climate Change.

What is the need?

• The government plans to develop the Indian Carbon Market (ICM) where a national framework will be established with the objective to decarbonise the Indian economy by pricing the Green House Gas (GHG) emission through trading of the carbon credit certificates.
• Even as an Indian Carbon Market (ICM) is being developed to decarbonize the economy and greenhouse gas (GHG) emissions are being priced through trading of carbon credit certificates, the CCTS will aim at enhancing India's energy transition efforts by covering potential energy sectors.
• The Bureau of Energy Efficiency under the Ministry of Power along with the Ministry of Environment, Forest & Climate Change are developing the Carbon Credit Trading Scheme.

What is the current system?

• Currently, India has an energy savings-based market mechanism.

What Indian Carbon Market (ICM) will do?

• The new avatar scheme will enhance the energy transition efforts with an increased scope that will cover the potential energy sectors.
• For these sectors, the GHG emissions intensity benchmark and targets will be developed, which will be aligned with India's emissions trajectory as per climate goals.
  • The trading of carbon credits will take place based on the performance against these sectoral trajectories.
• Voluntary mechanism: Further, it is envisaged that there will be a development of a voluntary mechanism concurrently, to encourage GHG reduction from non-obligated sectors.
• The ICM will develop methodologies for the estimation of carbon emissions reductions and removals from various registered projects, and stipulate the required validation, registration, verification, and issuance processes to operationalise the scheme.
• Monitoring, Reporting, Verification (MRV) guidelines for the emissions scheme will also be developed after consultations.
• Structure: A comprehensive institutional and governance structure will be set up with specific roles of each party involved in the execution of the ICM.
• The ICM will mobilise new mitigation opportunities through demand for emission credits by private and public entities.
• Significance: A well-designed, competitive carbon market mechanism would enable the reduction of GHG emissions at the least cost, both at the level of entity, as well as the overall sector and drive faster adoption of clean technologies, in a growing economy like India.