The Government of India is drafting a policy for the Indian Carbon Market. So All India Solar is going to help you understand what is carbon market and why it is important.
India’s transition to a low-emission economy will probably be more complicated than it is for most of the rest of Asia Pacific because it is a developing country. It will have to find a careful balance between investing in and implementing developing, low-emission technology and the necessity for continuing economic growth—and the concomitant rise in energy demand. It is anticipated that India’s emissions profile reduction will come at a large structural adjustment cost, but the cost of inaction will be higher. The Indian carbon market is going to be a reality and it will change the face of the Indian Energy Industry.
India has not yet updated its 2030 targets for the UNFCCC. With the current policy, it would easily surpass its current NDC target. The UN deadline of October 12, 2021, has already passed. Through a formal statement at Glasgow COP 26, the new NDC may further seek a deeper reduction in the emissions intensity.
India must take into account domestic carbon market growth with an aim to provide a sufficient market support mechanism for new mitigation prospects and simultaneously establish adequate momentum to drive demand to facilitate the achievement of these targets. Along with maintaining relevance, the operationalization should be economically advantageous, politically practicable, and based on the body of knowledge already in existence for handling ESCerts and REC transactions.
By establishing a common market for emissions trading through the creation of a meta registry, such a carbon market would assist in fostering synergies among various policy approaches for mitigating climate change. India will get an $8 million grant from the Partnership for Market Readiness (PMR) of the World Bank to help it get ready for and test-run the use of carbon pricing instruments to help cut greenhouse gas (GHG) emissions.
Through the Perform Achieve and Trade (PAT) Mechanism and the Renewable Energy Certificate (REC) Scheme, among other market-based initiatives, India will be able to widen and deepen the scope of its current market-based techniques to boost energy efficiency and renewable energy.
Additionally, funding will be used to create and test a novel market-based tool that could enhance energy efficiency or solid waste management in medium-sized and small businesses. To track greenhouse gas (GHG) emission reductions and to reinforce India’s current registry systems for the PAT and REC programs, some of the cash will be used to develop new systems. The improved method will encourage openness and environmental integrity, lower the possibility of duplicate counting, and assist India to get ready to participate in the international transfer of mitigation results.
A domestic carbon market with adequate support and administration will give the necessary support to a larger future expectation of not just meeting or exceeding the country’s NDC aspirations, but it may also opening up opportunities for ITMOs across sectors for their strong environmental benefits and acceptance across geographies.
Things Govt. to consider before launching Indian Carbon Market
- Analyzing the current market for several environmental equipment’s.
- Fungibility of instruments and their function in a national free market for carbon.
- Calibration and efficient supply and demand management for devices.
- Play and permission for intermediaries.
- Participation of non-energy industries with options to reduce their environmental impact and the kinds of mechanisms that can be used for transactions.
- Barriers to entry and exit for the export and import of emission reduction units.
- Fair and open price determination.
- maintenance and operation of registries.
The end of 2020 will see a significant shift in how greenhouse gas emissions are governed globally. In the future, the Paris Agreement will serve as the new framework for the international effort to slow global warming. This is a considerable departure from the Kyoto Protocol’s methodology. The voluntary carbon market, or the buying and selling of carbon credits voluntarily, is significantly impacted by the new framework of the Paris Agreement.
Understanding the voluntary carbon market’s potential to support efforts to combat climate change, as well as its future models, is especially important at a time when more and more businesses and individuals are voluntarily reducing their emissions and using carbon credits to make up for those that remain.
In the past, the majority of carbon credits have come from initiatives carried out in nations without Kyoto Protocol-mandated GHG emission objectives. In this case, the buyer and not the nation hosting the mitigation project used the emission reductions from the carbon credit alone to meet a target or goal related to mitigating climate change. However, all nations are required to develop climate targets or measures in the form of nationally determined contributions under the Paris Agreement (NDCs). If and how voluntary acquisition and retirement of carbon credits fits into this new global framework, in particular, this new context raises significant problems for the future role that voluntary offsetting can play.
The voluntary carbon market (VCM) has a modest demand at the moment, amounting to about 95 million tonnes of CO2 equivalent annually, or 0.2% of the world’s total greenhouse gas emissions. Analysis1 reveals, however, that demand is anticipated to rise significantly due to an increase in corporate Net Zero pledges. As a result, it will be more closely monitored to see if actual emissions reductions are happening. Real projects that reduce emissions must be more expensive because lower-cost projects must be used up as the demand for carbon credits grows.
The average price per tonne of CO2 equivalent today is $3–5, but by 2030, this price will need to rise to $20–50 per tonne of CO2 equivalent, and it may even rise to $100 per tonne of CO2 equivalent if governments start with lower cost projects. This is necessary if the financing of voluntary projects is to truly reduce emissions beyond those that would have occurred otherwise. Then, prices are anticipated to keep increasing until 2050.