OIES Podcast – Building the Indian Carbon Market
David Ledesma discusses with Mohua Mukherjee what to expect from the Indian Carbon Market which is under preparation at the moment and will be launched later in 2023. India, like other signatories to the Paris Agreement, will be setting up its emission trading rules as per Article 6 of the Agreement.
India was the second largest issuer of Certified Emission Reductions (CERs) under the Clean Development Mechanism, which was the predecessor to today’s carbon market. Therefore, the country already has considerable experience in the carbon offset market, which is the so-called voluntary market. It turns out that India also has two decades of experience in the compliance market, because it has been running a domestic energy efficiency scheme where large, energy-intensive industrial sectors are required to participate and meet their year-on-year targets to reduce their energy intensity. Companies that over-achieve their targets are issued with energy savings certificates. Companies that under-achieve must pay a penalty or buy the certificates from the over-achievers. A separate compliance market has been operating for a decade in the renewable energy sector, issuing renewable energy certificates to help certain companies meet their renewable purchase obligations.
There will be a two-year transition period where the present certificates (expressed in tons of oil equivalent and megawatt-hours respectively) will be converted and in future issued only in tons of CO2 equivalent. The future Indian carbon market will essentially absorb and combine the two existing compliance markets and the voluntary offset market. Accredited verifiers are being trained and methodologies for Monitoring Reporting and Verification (MRV) are being worked out. Early indications of how the Indian Carbon Market will be operated, point to the importance placed by India on meeting its ambitious NDC targets first, before allowing international trading in carbon credit certificates from emission reductions generated in India.