What the BRICS carbon market partnership needs

Source: The post “What the BRICS carbon market partnership needs” has been created based on “What the BRICS carbon market partnership needs” published in “The Hindu” on 5th November 2026.

UPSC Syllabus: GS 3: Environment

Context: The 18th BRICS Summit, held in New Delhi, reaffirmed the commitment of BRICS countries to operationalise the Memorandum of Understanding on the BRICS Carbon Markets Partnership. The partnership aims to promote cooperation through capacity-building, experience-sharing and harmonisation of carbon market mechanisms. However, its success requires a common framework rather than merely creating a common trading platform.

Present Status of Carbon Markets in BRICS

1. BRICS countries have developed different domestic carbon market mechanisms based on their respective economic and regulatory conditions.
2. China and India have adopted output-based emission-intensity benchmarks, while Brazil follows an absolute emissions cap.
3. China has a compliance carbon market covering sectors such as steel, cement and aluminium.
4. India’s Carbon Credit Trading Scheme (CCTS) has notified emission-intensity targets for 490 entities across nine sectors.
5. Brazil’s 2024 law establishes the Brazilian Greenhouse Gas Emissions Trading System (SBCE), a cap-and-trade mechanism.
6. South Africa, Indonesia and other BRICS members also operate voluntary carbon markets and host carbon credit projects.

Major Challenges in Integration

1. Divergent regulatory frameworks: Different emission benchmarks, compliance requirements and carbon pricing mechanisms make integration difficult.
2. Different legal status: In Brazil, carbon units are treated as securities, whereas in India, carbon credit certificates are traded through power exchanges under regulations issued by the Central Electricity Regulatory Commission (CERC).
3. Limited mutual recognition: China’s compliance market primarily recognises Chinese Certified Emission Reduction credits, while India’s market has restrictions on eligible project types.
4. Lack of common accounting standards: Differences in measurement, reporting and verification (MRV) systems make it difficult to compare carbon credits across countries.
5. External regulatory pressures: The European Union’s Carbon Border Adjustment Mechanism (CBAM), followed by the United Kingdom’s mechanism, creates pressure on exporters to demonstrate verified emissions data.
6. Risk of double counting and friction: Differences in national carbon accounting and credit classification may create disputes over ownership and corresponding adjustments.

Measures Required to Strengthen the BRICS Partnership

1. Establishing a Common Framework
   1. The first priority should be developing a common Measurement, Reporting and Verification (MRV) framework.
   2. BRICS countries should adopt comparable accounting standards, granular default values and interoperable systems to ensure consistency in carbon credit measurement.
   3. The partnership should build upon the principles of transparency, inclusiveness and fairness under the BRICS 2025 principles.
2. Linking Domestic Carbon Markets
   1. A BRICS rulebook should establish common monitoring rules consistent with ISO 14064 standards.
   2. Countries should mutually recognise verifiers accredited by their respective national accreditation bodies.
   3. Registry data fields should be harmonised to facilitate cross-border transactions and provide a common compliance pathway.
   4. This would help exporters deal with foreign regulators through a single compliance framework.
3. Addressing CBAM Challenges
   1. BRICS countries should collectively address unilateral and discriminatory trade measures such as CBAM.
   2. A common and credible carbon accounting system would help exporters demonstrate verified emission reductions and avoid punitive default values.
   3. Greater coordination would strengthen the negotiating position of BRICS members in international climate-related trade discussions.
4. Developing a Pilot Exchange Mechanism
   1. A small pilot exchange should be established to test cross-border trading of carbon credits.
   2. Article 6.2 of the Paris Agreement provides the legal basis for bilateral transfers of mitigation outcomes with corresponding adjustments.
   3. India’s Joint Crediting Mechanism with Japan provides a possible model for such cooperation.
   4. The pilot should initially involve countries with approved methodologies and authorised volumes of carbon credits.
5. Ensuring Institutional Coordination
   1. The New Development Bank could establish a shared registry data facility or provide purchasing facilities for pilot transactions.
   2. The dialogue should also address carbon market adaptation, including the allocation of proceeds from intra-BRICS transfers.
   3. Common MRV rules and methodology-level pilots should be prioritised over complete integration of domestic compliance markets.

Way Forward

1. BRICS should initially focus on a low-cost and methodology-level pilot rather than attempting immediate integration of all domestic carbon markets.
2. A common rulebook should preserve national regulatory autonomy while ensuring transparency, comparability and credibility.
3. The partnership should strengthen institutional coordination, improve registry systems and facilitate mutual recognition of verified carbon credits.
4. Cross-border cooperation should also address carbon accounting, legal classification, sanctions, compliance settlement and retirement of credits.

Conclusion: The BRICS Carbon Markets Partnership offers an opportunity to convert fragmented national carbon markets into a coordinated framework for climate cooperation. Instead of pursuing complete market integration immediately, BRICS should adopt a phased approach based on common MRV standards, credible accounting and pilot cross-border transactions. Such an approach can strengthen climate cooperation while protecting national regulatory interests and improving the competitiveness of BRICS exporters in global markets.

Question: “The BRICS Carbon Market Partnership has the potential to transform fragmented national carbon markets into a coordinated trading framework. However, its success depends on harmonisation of standards, credible accounting mechanisms and institutional cooperation.” Discuss.

Source: The Hindu