23 Jun India’s Carbon Market Reforms: Paving the Way for Sustainable Growth
This article covers “Daily Current Affairs” and the Topic of India’s Carbon Market Reforms: Paving the Way for Sustainable Growth
SYLLABUS MAPPING:
GS-3-Environment- India’s Carbon Market Reforms: Paving the Way for Sustainable Growth
FOR PRELIMS
What is Mission LiFE? How can individual and community actions under Mission LiFE contribute to climate change mitigation?
FOR MAINS
What steps has the Indian government taken to ensure inclusive and sustainable development for minority communities?
Why in the News?
In the last eleven years, the Government of India has taken significant strides toward fostering inclusive development and bridging socio-economic gaps for the six centrally notified minority communities- Muslims, Christians, Sikhs, Buddhists, Parsis, and Jains. Through a blend of educational opportunities, economic empowerment schemes, community infrastructure projects, cultural preservation, and digital reforms, the groundwork has been laid for sustainable and equitable growth. These initiatives showcase a steadfast commitment to ensuring dignity, equal opportunity, and holistic development for all minority citizens of India.
India’s Position in the Global Carbon Pricing Landscape
1. India as a Climate Leader among Emerging Economies: India is among key middle-income and emerging economies like Brazil and Türkiye that are making tangible progress in implementing carbon pricing mechanisms.
2. Shift Toward a Rate-Based Emissions Trading System (ETS): India is transitioning to a rate-based ETS, focusing on emissions intensity (emissions per unit of output) rather than absolute caps, allowing flexibility for economic growth.
3. Launch of the Carbon Credit Trading Scheme (CCTS): Introduced in July 2024, the CCTS marks a significant step in institutionalizing carbon pricing in India, laying the groundwork for the Indian Carbon Market (ICM).
4. Initial Sectoral Coverage: The national ETS will initially cover nine energy-intensive industrial sectors, including cement, steel, aluminum, and thermal power.
5. Performance-Based Credit Allocation: Entities that outperform benchmark emissions intensity levels are issued Carbon Credit Certificates, which can be traded in the market.
6. Dual Structure: Compliance + Offset Mechanism:
Compliance Mechanism: Targets obligated entities in regulated sectors to achieve emission intensity targets.
Voluntary Offset Mechanism: Allows participation from non-obligated entities (e.g., agriculture, green hydrogen, clean cooking) to earn credits via approved methodologies.
7. Institutional and Legal Framework: CCTS is supported by the Energy Conservation (Amendment) Act, 2022, and managed by the Bureau of Energy Efficiency (BEE) under the Ministry of Power, ensuring a robust governance model.
8. Position in Global Carbon Market Landscape: India’s model emphasizes equity and sustainable development, balancing climate goals with national growth priorities, in line with the principle of Common But Differentiated Responsibilities (CBDR-RC).
Comparison with Other Emerging Economies on Carbon Pricing Systems
| Country | ETS Type | Coverage Sectors | Operational Status |
|---|---|---|---|
| India | Rate-based | 9 industrial sectors (e.g., steel, cement, power) | Regulatory stage |
| China | Rate-based | Power, cement, steel, aluminum | Operational |
| Brazil | Cap-based | All sectors except agriculture | Law passed (Dec 2024) |
| Indonesia | Rate-based | Grid-connected coal/gas power plants (expanded in 2024) | Operational |
Domestic Policy Backing
1. Energy Conservation (Amendment) Act, 2022: Legal foundation for India’s carbon market; authorizes issuance of carbon credit certificates. Enables regulatory mechanisms for compliance and carbon market governance.
2. National Green Hydrogen Mission: Supports carbon crediting; targets 5 MMT green hydrogen annually by 2030. Aims to decarbonize hard-to-abate sectors like steel, fertilizers, and transport.
3. PAT Scheme (since 2012): Led by BEE; cut emissions intensity by 15–25% in key sectors. Forms the backbone for transitioning toward the upcoming Emissions Trading System (ETS).
4. Renewable Energy Goal: 500 GW non-fossil fuel capacity targeted by 2030. Key pillar for achieving India’s net-zero commitment by 2070.
Government Steps to Strengthen Carbon Market Readiness
Mission LiFE (Lifestyle for Environment)
What is Mission LiFE?
A global movement launched by India to promote sustainable living through mindful, eco-friendly habits, encouraging people to become “Pro-Planet.” It fosters individual responsibility in tackling climate change and resource conservation.
What does it do?
Nudges behavioural change (e.g., energy saving, plastic reduction, composting), shapes market preferences, and inspires policy shifts. Supports sustainable consumption patterns and long-term environmental resilience.
What are its goals?
Mobilise 1 billion people globally by 2028, green 80% of India’s villages/urban bodies, and deliver measurable climate impact. Aligns with India’s climate commitments under the Paris Agreement.
Green Credit Program (GCP)
What is GCP?
A voluntary, market-based mechanism under the Environment Protection Act, 1986, was notified in Oct 2023 to incentivize tree plantation on degraded forest land. Managed through a dedicated digital portal and credit registry system.
How it works:
Land banks registered by forest departments are offered to participants for plantation. Participants maintain plantations for 10 years and receive Green Credits after verification.
Who can join?
Government bodies, PSUs, NGOs, private firms, societies, philanthropies, and individuals. Encourages broad-based participation in climate-positive activities.
Objectives: Expand forest/tree cover, create an inventory of degraded land, and reward voluntary green efforts.
Integrates climate goals with nature-based solutions.
Governance & Oversight: Composed of officials from key ministries, states, and industry experts, NSC-ICM is the apex decision-making body for India’s carbon market.
Provides leadership for market design, implementation, and alignment with national goals.
Core Functions:
Advises BEE on:
1. Institutional framework and market rules
2. GHG intensity targets for obligated sectors
3. Credit issuance, validation, renewal, and international trading norms
4. Constituting working groups and monitoring the carbon market
5. Ensures integrity, transparency, and scalability of India’s carbon pricing mechanism.
Purpose & Mandate: Established under the Energy Conservation Act, 2001, BEE is India’s nodal agency for promoting energy efficiency across key sectors. Aims to reduce energy intensity and GHG emissions in a cost-effective manner.
Core Functions & Strategies:
1. Appliance standards and labelling
2. Energy conservation building codes
3. Efficiency benchmarks for industries
4. Public awareness and training programs
Conclusion
India’s proactive carbon pricing journey exemplifies a balanced model—anchored in climate equity, domestic policy strength, and international best practices. With robust legal backing, inclusive mechanisms like the Green Credit Program and voluntary offset markets, and global leadership through Mission LiFE, India is building a climate-resilient economy. As implementation of the Emissions Trading System gains momentum, India is poised not only to meet its net-zero target by 2070 but also to become a model for climate-smart development among emerging economies.
Prelims Questions
Q. Which of the following initiatives are aimed at strengthening India’s readiness for carbon market implementation?
1. Mission LiFE
2. Green Credit Program
3. National Green Hydrogen Mission
4. Smart Cities Mission
Select the correct answer using the code below:
A. 1, 2 and 3 only
B. 1 and 4 only
C. 2 and 3 only
D. 1, 2, 3 and 4
Answer: A
Mains Questions
Q. India is taking a pragmatic and inclusive approach to carbon pricing through the Carbon Credit Trading Scheme (CCTS) and related reforms. Discuss the structure, objectives, and significance of India’s carbon market mechanism in the context of global climate commitments and national development goals.
(250 words, 15 marks)
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