India’s Potential in Carbon Trade Market and 29th Conference of Parties (COP29)

Key Focus: Article 6 of the Paris Climate Agreement

• Article 6 Provisions: Article 6 of the Paris Climate Agreement (2015) provides a framework for establishing carbon markets by enabling countries to trade credits from reduced or prevented greenhouse gas emissions.
  • This article aims to incentivize climate action by promoting carbon trading among nations.
• Carbon Credits: Countries may claim carbon credits by demonstrating greenhouse gas reduction or removal efforts such as shifting from fossil fuels to renewable energy or preserving ecosystems (e.g., forests) that naturally lock carbon.
• Verification Mechanisms: Subsections of Article 6 offer guidelines on permissible carbon-reduction activities, including verification processes and bilateral agreements that allow one country’s emission reductions to be claimed by another.

India’s Potential in the Carbon Market

• Renewable Energy Goals: India has pledged to generate half of its electricity from non-fossil fuel sources by 2030, positioning itself as a leading host of carbon-reduction projects.
• Forestry Projects: Private enterprises in India are setting up innovative forestry initiatives to store carbon.
  • These projects, reportedly locking carbon, allow multinational companies to claim credits traded in voluntary carbon markets.
• Iron and Steel Industry: The Indian iron and steel industries are among the nine sectors expected to meet emission intensity standards by 2025.
  • This would limit carbon emissions per production unit and potentially launch India’s formal carbon market, depending on regulatory compliance.

Challenges and Future Considerations

• Calculating Carbon Saved: The process of calculating carbon savings remains complex and subject to varied methodologies.
• Policy and Regulatory Enforcement: India must ensure that carbon market policies and calculations are fair, transparent, and internationally aligned to avoid the pitfalls observed in the country’s energy-efficiency trading scheme.
• India’s Research Efforts: There is an urgent need for Indian research institutions to develop policies on par with global standards to facilitate effective compliance and enforcement across industries.

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