India’s Opportunities and Challenges in Carbon Markets

Source: The post India’s opportunities and challenges in carbon markets has been created, based on the article “Fair trade: India must develop a transparent carbon trade policy” published in “The Hindu” on 26th October 2024

UPSC Syllabus Topic: GS paper3- Environment

Context: The article discusses the push for India’s transition to carbon markets ahead of the COP29 in Baku. It highlights the role of Article 6 of the Paris Agreement in enabling carbon credit trading and India’s plans to meet emission standards.

What is the Focus of COP29 in Baku?

1. The upcoming 29th Conference of Parties (COP29) in Baku, Azerbaijan, will focus on increasing climate finance and clarifying the rules for carbon markets as outlined in Article 6 of the Paris Climate Agreement.
2. Article 6 of the Paris Agreement, signed in 2015, defines how carbon markets can work globally. It allows countries to trade in carbon credits, which come from reducing or removing greenhouse gases.
3. This trade encourages nations to take more climate-friendly actions, like using renewable energy or conserving forests.

What are Carbon Markets?

1. Carbon markets allow countries or companies to trade carbon credits. These credits are generated by actions like switching to renewable energy or maintaining forests that absorb carbon dioxide. This system aims to motivate more countries and companies to reduce their greenhouse gas emissions.
2. Carbon markets have faced criticism for being unclear and ineffective. For years, there has been confusion about how to verify carbon credits.
3. However, COP29 is expected to provide guidelines on verifying credits, making it possible for countries to claim legal credits starting next year.

For detailed information on What are carbon markets read this article here

What are India’s Opportunities and Challenges in Carbon Markets?

1. Opportunities for India in Carbon Markets:
2. India’s commitment to generate 50% of electricity from non-fossil sources by 2030 positions it as a key player in carbon-reduction projects.
3. With its voluntary carbon markets, Indian companies, including those in forestry, are creating carbon-trapping initiatives, attracting multinational interest.
4. The iron and steel industries are expected to meet emission standards by 2025, setting the stage for India’s formal carbon market launch.
5. COP29 may bring clear guidelines, enabling India to legally claim and trade verified carbon credits.
6. Challenges for India in Carbon Markets:
7. Verifying carbon credits is complex and lacks transparency, risking ineffective compliance.
8. Past experiences, like the energy-efficiency trading scheme, show limited pressure on companies to meet targets.
9. India needs transparent, globally-aligned policies to maintain credibility and attract investment.

For detailed information on India stands to gain from the trading of carbon credits read this article here

Question for practice:

Examine how COP29 in Baku is expected to impact the rules for carbon markets and what this means for India’s participation in carbon trading.