A carbon market focused on India’s industrial sector and aligned with existing voluntary commitments by Indian corporations could lead to a 5.6% reduction in emissions intensity of GDP in 2030, equivalent to a cumulative reduction of 1.3 billion metric tons of carbon dioxide equivalent between 2022 and 2030, according to a study by the World Resources Institute (WRI). India has already announced its aim to reduce the emission intensity per unit of GDP by 45% by 2030 and achieve net zero by 2070, along with a goal to reduce one billion metric tonnes of carbon emissions by 2030.
The study was conducted in 2020-21 and included 21 large Indian businesses, representing around 10% of India’s industry emissions. All elements of a carbon market demonstrated a 28% reduction in the total cost of emissions reductions, according to the findings from the report, which were presented at the Business 20 (B20)-Think20 (T20) convening in Mumbai.
The B20 and T20 are official engagement groups of the G20, and carbon markets now cover 16% of global emissions, according to the World Bank (2021). The WRI report stated that with a carbon market, India has an instrument that can provide the right policy and price signals to incentivise deep decarbonisation from the industry sector while ensuring global competitiveness.
The Bureau of Energy Efficiency will administer India’s carbon trading framework, which is getting ready for its rollout. Abhay Bakre, Director General, Bureau of Energy Efficiency, said carbon markets are one of the most cost-effective tools to achieve aggressive efforts to mitigate emissions as economies mature. Bakre added that the Indian carbon market will be the leading market in the world by 2030 and that the market will drive decarbonisation efforts while driving the cost of technologies down.
To build a robust framework for the carbon market in India, effective amendments were made to the Energy Conservation Act India, and several stakeholder consultations were held in parallel. The Indian government is also building a pool of verifiers and a robust electronic platform to register projects, manage credits, and build better confidence among industries.
By implementing domestic market-based mechanisms to promote energy efficiency and renewable energy, namely, the Perform, Achieve, Trade (PAT) and Renewable Energy Certificate (REC) schemes, respectively, India has created some institutional capacity for operationalising market-based mechanisms over the last decade, the report said.
Ravi Pandit, Chairman and Co-founder, KPIT Technologies, said, “Industries are at the opportune time to lead the way to the decarbonisation efforts. Carbon trading is an efficient and effective way of reducing emissions. Our study shows that the cost of mitigation comes down by approximately 28%. It is important to focus on the design, management, and capacity building.”
India’s carbon market can give businesses a clear policy signal to shift investments toward low-carbon technology. This should also be accompanied by an emissions reporting programme and targeted capacity building to prepare the Indian industry, said Ulka Kelkar, Director of the Climate Program at WRI India.
Reflecting on the need for international uniformity as countries announce their own carbon markets, Dr Riza Suarga, Chairman, Indonesia Carbon Trade Association said, “Indonesia is planning to release a carbon exchange by mid this year. Indonesia also plans to conduct cross-sectoral carbon trading.”
