Global Carbon Coalition And India’s Carbon Credit Trading Scheme
Source: The Hindu
GS III: Environment, Conservation, Environmental Pollution and Degradation
Overview
- The Open Coalition on Compliance Carbon Markets (OCCCM) aims to improve coordination and compatibility among national carbon markets.
- India’s Carbon Credit Trading Scheme (CCTS) promotes industrial emission reductions through tradable carbon credits.
- Joining the coalition could help India influence global carbon market rules, attract green investment and address climate-related trade challenges such as the EU’s CBAM.
- India must balance climate commitments with economic growth, industrial competitiveness and climate equity, while protecting the interests of developing countries.
Why in the News?
India’s Carbon Credit Trading Scheme is operational, but India has not joined the Open Coalition on Compliance Carbon Markets (OCCCM), which seeks to align global carbon markets. The debate focuses on protecting India’s economic and climate interests while shaping global carbon market rules.
News in Brief
- The OCCCM was launched by the European Union, China and Brazil to improve coordination among compliance carbon markets.
- India’s Carbon Credit Trading Scheme aims to encourage industries to reduce emissions through tradable carbon credits.
- The European Union’s Carbon Border Adjustment Mechanism (CBAM) makes carbon emissions increasingly relevant to international trade.
- Joining the coalition could help India influence global carbon accounting standards and prepare for emerging climate-related trade rules.
What is the Open Coalition on Compliance Carbon Markets?
- The OCCCM is an international platform for countries to coordinate their domestic carbon markets.
- Its work includes carbon pricing, carbon accounting, emission verification and the use of carbon offsets.
- It does not impose uniform emission-reduction targets on its members.
- Instead, it seeks to improve the compatibility of different carbon market systems.
Carbon pricing and carbon markets
- Carbon pricing assigns a monetary cost to greenhouse gas emissions.
- It encourages industries to reduce emissions by making pollution economically costly.
- Two major approaches are;
- Carbon tax: The government charges a fixed price for each unit of emissions.
- Emissions trading system (ETS): Entities trade emission allowances or credits within a regulated market.
Carbon Credit Trading Scheme (CCTs), India
- India notified the CCTS in 2023 under the Energy Conservation Act, 2001, as amended in 2022.
- It forms the basis of the Indian Carbon Market.
- Compliance mechanism: Covered industries must meet specified greenhouse gas emission-intensity targets.
- Entities performing better than their targets can earn tradable Carbon Credit Certificates.
- Offset mechanism: Eligible entities can register projects that reduce, remove or avoid emissions and seek carbon credits.
- Bureau of Energy Efficiency (BEE): Administers the scheme.
- Grid Controller of India: Operates the carbon market registry.
- Central Electricity Regulatory Commission (CERC): Regulates carbon credit trading on power exchanges.
Why should India consider joining?
- Influence global rules- Participation would allow India to contribute to the development of carbon market standards rather than simply adapt to rules created by others.
- Improve trade competitiveness- Greater compatibility between carbon markets could help Indian exporters navigate climate-related trade measures.
- Attract investment- A credible carbon market can encourage investment in cleaner technologies and emission-reduction projects.
- Reduce compliance costs- Carbon pricing can help industries identify relatively cost-effective ways to reduce emissions.
- Strengthen climate diplomacy- Participation could improve India’s engagement with both developed and developing countries on climate policy.
Challenges for India
- Different levels of development
- India argues that developing countries need policy space to pursue economic growth while reducing emissions.
- Low carbon prices
- Differences between India’s carbon price and those in developed economies may limit the immediate benefits of linking markets.
- Carbon Border Adjustment Mechanism
- India has raised concerns that the EU’s CBAM could act as a trade barrier and disadvantage developing-country exporters.
- Different accounting standards
- India’s emission-intensity targets may not be directly comparable with systems based on absolute emission caps.
- Domestic industrial impact
- Poorly designed carbon pricing could increase production costs for energy-intensive industries.
Carbon Border Adjustment Mechanism (CBAM)
- The European Union’s CBAM seeks to address carbon emissions associated with certain imported goods.
- It can affect the competitiveness of exporters from countries with different carbon-pricing systems.
- For India, the key concern is whether such measures impose additional costs on domestic industries, particularly in carbon-intensive sectors.
Other Important concepts
- Paris Agreement: International climate agreement under which countries submit Nationally Determined Contributions (NDCs).
- Net-zero emissions: A balance between greenhouse gases emitted and those removed from the atmosphere.
- Carbon leakage: The shifting of production and emissions to countries with less stringent climate policies.
- MRV framework: Monitoring, Reporting and Verification ensures that reported emission reductions are measurable, transparent and credible.
Way Forward and Conlcusion
India should consider joining the OCCCM to influence global carbon market rules while safeguarding its national interests. It should strengthen domestic carbon markets, improve transparency and verification, support cleaner technologies and ensure fair standards based on climate equity and CBDR-RC.
India must balance climate action, industrial competitiveness and economic development. Engagement with the global carbon coalition can help shape international rules while protecting the priorities of developing countries.
UPSC Prelims and Mains Practice Question
Consider the following statements regarding India’s Carbon Credit Trading Scheme:
1. It provides for compliance and offset mechanisms.
2. The Bureau of Energy Efficiency administers the scheme.
3. Carbon Credit Certificates can be traded through power exchanges.
Which of the statements given above are correct?
(a) 1 and 2 only
(b) 2 and 3 only
(c) 1 and 3 only
(d) 1, 2 and 3
Answer: (d) 1, 2 and 3
Mains Practice Question
Q) Carbon markets can promote cost-effective emission reductions, but differences in climate policies may create new trade barriers. Discuss in the context of India’s Carbon Credit Trading Scheme and the proposed global carbon coalition. (250 words)
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