Ensure safeguards for India’s carbon market

UPSC Syllabus Topic: GS Paper 3 –Environment .

Introduction

Growth-led development has strained planetary boundaries, but degrowth is neither fair nor feasible for countries still facing poverty and hunger. A better path is to decouple growth from environmental harm by scaling cleaner technologies, renewable energy, and sustainable farming. India’s expansion of solar power and micro-irrigation shows this balance is possible. Carbon credits can support the transition, but they must protect rights, ensure fair benefits, and maintain integrity to avoid harm. Ensure safeguards for India’s carbon market.

About Carbon credits

Carbon credits represent a certified reduction or removal of greenhouse gases, expressed in carbon-dioxide (CO₂) equivalents.

They are generated through mitigation activities such as renewable energy or sequestration efforts such as reforestation, agroforestry, and biochar.

Firms buy these credits to offset emissions while they transition to cleaner processes, ideally rewarding developing countries for adopting low-carbon practices.

The market is booming, with 175–180 million credits retired annually, mainly from renewables and nature-based projects like REDD+ and afforestation.

There are four general stages of a carbon credit’s lifecycle.

Origin and evolution

1. First idea: The idea of using tradable permits for pollution control is traced to economists Crocker (1966) and John H. Dales (1968), often cited as the early architects of marketable pollution rights.
2. Kyoto Protocol (adopted 1997; in force 2005): Building on that idea, Kyoto created the world’s first global carbon-market architecture—Clean Development Mechanism (CDM), Joint Implementation (JI), and Emissions Trading—with Certified Emission Reductions (CERs) equal to 1 tonne of CO₂e.

• Clean Development Mechanism (CDM): Allowed industrialized countries to invest in emission reduction projects in developing nations to earn tradable Certified Emission Reductions (CERs).
• Joint Implementation: Enabled Annex I (developed) countries to trade Emission Reduction Units (ERUs) among themselves.
• International Emissions Trading: Allowed countries with surplus allowances to sell them to countries with deficits.

3. Paris Agreement (adopted 2015; in force 2016): Reinforced carbon trading under Article 6, replacing and updating Kyoto’s mechanisms. It allows countries to voluntarily cooperate to achieve their climate targets, known as Nationally Determined Contributions (NDCs), by trading Internationally Transferred Mitigation Outcomes (ITMOs).

• Article 6.2: Countries may transfer mitigation outcomes internationally (ITMOs) with accounting to avoid double counting.
• Article 6.4: A UN-supervised mechanism will issue credits via an Article 6.4 registry.
• Article 6.8: A framework for non-market approaches.

4. COP26 (Glasgow, 2021): Parties finalised the Article 6 rulebook, enabling implementation (6.2 guidance, 6.4 modalities/procedures, 6.8 work programme).
   5. COP28 (Dubai, 2023): Parties did not adopt additional decisions on 6.2/6.4, so some operational details remain open.

Initiative taken for the carbon credit

1. United nation initiative

• Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA programme): A global market-based initiative to curb emissions from international aviation by requiring airlines to offset growth in emissions above 2020 levels.
• UNEP endorses and supports the two voluntary carbon market integrity initiatives (VCMI and ICVCM) that are in the process of developing best practice requirements for independent standards and market stakeholders.
• VCMI is a global nonprofit providing guidance on how to make a meaningful impact on climate action through voluntary use of carbon credits.
• The Integrity Council for the Voluntary Carbon Market (ICVCM) is multi-stakeholder led independent governance body. It establishes and maintains the highest standards of ethics, sustainability, and transparency for the global voluntary carbon market.
• Voluntary Carbon Markets (VCMs): Outside of mandatory regulations, organizations participate in VCMs to purchase credits from projects that reduce or remove GHG emissions. Key standards and registries include:
• Verra’s Verified Carbon Standard (VCS): One of the most widely used standards for generating voluntary credits.
• The Gold Standard: Developed by the World Wide Fund for Nature (WWF), in 2003, this program supports projects that reduce GHG emissions and contribute to sustainable development.
• Integrity Council for the Voluntary Carbon Market (ICVCM): An initiative defining the Core Carbon Principles to ensure high integrity in the market.

1. Several countries and regions have implemented carbon market mechanisms tailored to their national contexts.

• The European Union Emissions Trading System (EU ETS) remains the world’s most established and comprehensive carbon market. Operating since 2005.
• China’s national ETS, launched in 2021 and significantly expanded in 2024, is now the largest in the world by emissions volume.
• Brazil finalized the legal framework for its national ETS in 2024, following years of stakeholder engagement and technical groundwork.
• New Zealand launched its ETS in 2008, covering nearly all sectors, including forestry.
• In 2015, the Republic of Korea launched the first nationwide ETS in East Asia.

1. National initiatives (India)

• Carbon Credit Trading Scheme (CCTS), 2023: A market-based mechanism enacted under the Energy Conservation (Amendment) Act, 2022. It establishes a framework for a domestic carbon market in India.
• Green Credit Programme (GCP): An initiative that incentivizes environmentally friendly actions beyond GHG emission reductions.
• National Agroforestry Policy, 2014: Aims to expand tree cover on farmlands for carbon sequestration, with initiatives like the GROW Portal mapping potential areas.
• Blue Carbon Initiatives: Projects to restore coastal and marine ecosystems like mangroves for carbon sequestration, aligning with India’s NDC commitments. (Mangrove Initiative for Shoreline Habitats & Tangible Incomes – (MISHTI) scheme)

Concerns related to carbon credits

1. Unfair benefit-sharing: When companies set the rules and keep terms unclear, communities are sidelined and get a small share of the benefits.
2. Land rights disruption: When free, prior, and informed consent (FPIC) is bypassed, community tenure and access suffer. The Kenyan court’s finding that key conservancies lacked public participation—and Verra’s suspensions—illustrate how skipping consent can unravel entire projects.
3. Credibility and measurement: Weak measurement and monitoring—such as flawed soil-carbon accounting—undermine the integrity of credits and erode trust.
4. Exclusion: Smallholders and marginalised caste groups in India are often excluded because engagement and follow-up are weak; CIMMYT’s findings of low farmer participation reflect this gap.
5. Policy blind spots: India’s Carbon Credit Trading Scheme (CCTS) emphasises procedures and compliance but gives insufficient attention to land rights, FPIC, and equitable revenue sharing.
6. Agriculture lag: Despite high potential, agriculture projects struggle to mature. Of 64 Indian agri projects under Verra, only four are registered and none has issued credits, revealing systemic barriers to farmer-led carbon outcomes..

Way forward

1. Secure rights with community control. Make FPIC mandatory, recognise community and customary tenure, and co-design projects with elected local bodies so rules fit local needs.
2. Make benefits transparent. Publish simple benefit-sharing contracts and payment schedules, and track all revenues openly so communities can see what is owed and what is received.
3. Independent oversight. Keep procedures light but predictable, and set up a national environmental regulator—on the lines of SEBI/RBI—to set standards and supervise carbon markets.
4. Guarantee credit quality. Use robust MRV (Monitoring, Reporting, and Verification), conservative baselines, and independent audits, and adopt tech-enabled public dashboards to prevent “inspect-and-extort” practices.
5. Include and equip farmers. Fund outreach, hands-on training, and after-care for smallholders and marginalised groups, and operationalise accessible agri methods (biomass, Compressed Biogas, low-emission rice).
6. Build public trust. Hold regular stakeholder consultations, update rules based on feedback and evidence, and promote environmental literacy so citizens understand roles and responsibilities.

Conclusion

Carbon credits can align growth with sustainability only when justice anchors the market. India should pair expansion with FPIC, secure land rights, transparent benefit-sharing, inclusion of smallholders, and lean oversight with robust MRV. If communities lead and integrity is enforced, climate action can progress without repeating extractive, top-down models.

Question for practice:

Discuss how carbon credits can help decouple economic growth from environmental harm in India, and explain the key safeguards needed to protect community rights and ensure high-integrity credits.

Source: The Hindu