India Set to Launch Carbon Market by 2026

September 17, 2024

India is preparing to create a carbon market through the Carbon Credit Trading Scheme (CCTS), first announced in June 2023. This plan is designed to help reduce harmful emissions in different industries. Under this scheme, sectors that manage to reduce their emissions more than required can sell carbon credits to those that cannot meet their targets. Those who fall short of their goals must buy these credits to offset their emissions.

When will the CCTS start?

The detailed rules for how the CCTS will work were shared by the Bureau of Energy Efficiency (BEE) in August 2024. However, the government has not yet set specific emission reduction targets, which are needed to make the scheme work. BEE officials believe that the scheme might start functioning by 2026.

What is the CCTS?

The CCTS is a system that encourages companies to either reduce or limit their emissions. It is part of India’s commitment to the Paris Agreement of 2016, where the country promised to cut its emissions intensity (the amount of emissions per unit of GDP) by 45% from 2005 levels by 2030. This means that India is working to produce less pollution while growing its economy.

India’s emission reduction goals

Apart from the 2030 target, India also has a long-term goal of achieving net-zero emissions by 2070. This means that by 2070, India aims to balance the amount of greenhouse gases it emits with the amount it removes from the atmosphere. This is important both for global climate efforts and for managing the impact of climate change within India.

Why is India introducing the CCTS?

India’s decision to introduce the CCTS is partly influenced by international actions, such as the European Union’s Carbon Border Adjustment Mechanism (CBAM). Set to start in 2026, the CBAM will place a tax on imported goods based on how much pollution was created during their production. Countries like China and Indonesia have also created carbon markets, which likely encouraged India to pursue similar strategies.

The biggest challenge for the CCTS is making sure it truly helps reduce emissions. Its success depends on setting strong emission targets and ensuring that industries follow the rules.

What is a carbon market?

A carbon market allows companies to trade carbon credits to reduce the overall impact of carbon dioxide (CO2) emissions. One carbon credit equals one ton of CO2 reduced. The idea started with the Kyoto Protocol in 1997. For example, California has a large cap-and-trade program, and the European Union began its Trading System in 2005. There are also voluntary markets, where companies or individuals can buy carbon credits to offset their own emissions. New technologies, like blockchain, are being explored to improve transparency in these markets. Carbon markets also support sustainable development and biodiversity conservation efforts.

« Previous Post Next Post »