India stands to gain from the trading of carbon credits
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Source: The post is based on the article “India stands to gain from the trading of carbon credits” published in Mint on 2nd June 2023.

Syllabus: GS 3 – Environment

Relevance: benefit and challenges associated with carbon credit market

News: The article explains measures taken by India to combat climate change and benefit and challenges associated with carbon credit market.

What are the measures taken by India to tackle climate change?

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India, despite having 17% of the global population, has the lowest per capita emissions among major economies, accounting only 5% of the global total emissions.

However, projections indicate that India’s emissions would increase. Therefore, India has called on the developed nationals to fulfill their promise of climate financing.

Further, the government is also taking measures to establish a carbon credit market to achieve the Nationally Determined Contributions (NDC) goals.

Read More: Carbon Markets: Benefits and Challenges – Explained

How can the carbon credit market benefit India?

Extra carbon credits may be sold globally, allowing other countries to receive significant amounts of carbon credits from India.

This can generate revenue to finance climate change mitigation projects and help in transitioning to a low-carbon economy.

What are the challenges with the carbon credit market?

Competition: In 2021, the global carbon credits market experienced a significant growth of 164%. It is projected to surpass $100 billion by 2030. This growth has implications for India’s domestic carbon market, as increased competition for carbon credits may result in higher prices within the country.

However, due to the international cooperation promoted by the Paris Agreement, this is unlikely to happen.

Instead, the establishment of a global carbon market could potentially create a more balanced playing field, which could be advantageous for developing countries like India.

Edge for Developed Nation: Developed nations hold an advantage due to their technical and financial capabilities, allowing them to generate and sell carbon credits at a lower cost.

Hence, a standardized system within a global carbon market is needed to address this imbalance.

Lack of Centralized Regulatory Body: Currently, trading carbon credits between countries involves complex bilateral agreements, additional reporting requirements, and country authorizations.

Therefore, a centralized registry and regulatory body is needed that would facilitate smoother international trading for India, reducing administrative burdens.

What more steps can be taken by India to achieve transition to a low-carbon economy?

a)) achieve the target of building 175GW of installed renewable energy capacity by 2022 and 450GW by 2030, b) India would need to increase its total installed solar power capacity to over 5,600GW to attain net-zero by 2070, c) the use of coal, particularly in power generation, would have to decrease by 99% by 2060, d) consumption of crude oil across different sectors would need to reach its peak by 2050 and then significantly decrease by 90% between 2050 and 2070, e) the industrial sector could potentially meet 19% of its total energy requirements through the use of green hydrogen.

What can be the way ahead?

India can position itself as a key player in the global carbon market and achieve its climate goals while promoting sustainable development by following the 5 Es formula.

5 Es formula—Enhancing carbon reduction efforts, Establishing robust monitoring and reporting systems, Encouraging international cooperation, Exploring technology and Innovation, and Empowering local stakeholders.


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