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Striking a Green balance

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• GS 3: Conservation, Environmental Pollution and Degradation, Environmental Impact Assessment.
• Tags: #CarbonTrading #ClimateChange #CarbonCredits #NetZero2030 #GreenEconomy #CarbonMarket #Decarbonization #Indianexpresseditorialanalysis #UPSC

Why in the News? 

India, like many nations, faces the dual challenge of economic development and climate change mitigation. A robust carbon trading network is emerging as a vital solution to address this urgent dilemma.

India’s Urgent Need to Address Climate Change and Emissions

As India progresses its economy to meet growing demands, it faces significant challenges from climate change. Urgent action is needed to adopt practices that reduce greenhouse gas emissions due to worsening global warming impacts.

Carbon Credits for Emission Control

In the fight against climate change, a dynamic carbon trading system is gaining attention.

• Carbon credits work like permits for organizations to emit a set amount of CO2 each year.
• Entities with low emissions can sell these credits through a carbon trading platform.
• Other companies can then buy these credits to compensate for their emissions.
• It’s a way to encourage emission reduction and support cleaner practices.

Challenges in Decarbonization for Industries

• As the world faces rising temperatures and increasing greenhouse gas (GHG) emissions, everyone from governments to investors and consumers is becoming more aware of their carbon footprint.
• However, some industries like cement, chemicals, iron and steel production, and non-ferrous metals find it hard to reduce emissions.
• For them, decarbonization is difficult and expensive compared to sectors like transportation and power generation.
• Still, these industries, being major GHG emitters, are required to meet emission reduction targets either due to local regulations or their own commitments.

Carbon Credits for Sustainability

• Companies can use carbon credits to meet sustainability goals.
• They can either buy these credits or invest in projects that generate them.
• India is planning to create the Indian Carbon Market (ICM) by establishing a national framework.
• This framework aims to reduce greenhouse gas emissions by pricing them through the trading of carbon credit certificates.
• The draft framework for the Indian Carbon Credit Scheme 2023 has been notified by the government.
• The Bureau of Energy Efficiency, under the Ministry of Power, is working with the Ministry of Environment, Forest & Climate Change to develop the Carbon Trading Scheme.

ICM for Lower Emissions

• The Indian Carbon Market (ICM) is expected to attract investments for a shift toward a low-carbon environment.
• This will aid India in reducing the emissions intensity of its GDP by 45% by 2030, aligning with its global climate commitments and National Determined Contribution (NDC) targets, compared to 2005 levels.

Boosting Energy Transition

• Carbon credit trading will complement India’s existing energy savings-linked market mechanism, expanding its reach to various energy segments.
• This will facilitate energy transition by setting GHG emissions intensity targets that align with domestic emissions trends and climate goals.
• Carbon credit transactions will be customized to sectorial performance and progress, further promoting sustainable practices and emission reduction efforts.

Draft Lacks Detailed Regulations

• The draft notification from the Centre lacks specific procedures, regulations, or guidelines for carbon markets.
• Instead, a National Steering Committee, led by the Secretary of the Ministry of Power, will oversee these aspects.

Decarbonization Goals

• The Indian Carbon Market (ICM) aligns with the government’s target of achieving net-zero emissions by 2070.
• It aims to decarbonize the commercial and industrial sectors.
• While regulated, the ICM provides flexibility for industries with challenging emissions to enhance their efforts through carbon market credits.
• The ICM has the potential to draw investments and technology for sustainable projects that generate carbon credits.
• It can play a significant role in funding the shift to a low-carbon economy.

Driving Awareness and Innovation

• The Centre’s decision will also increase awareness, reform, and innovation in areas that are difficult to question.
• Carbon pricing will directly affect industries, prompting businesses to consider environmental impact in their strategies.
• This shift will attract investments, leading to more eco-friendly business practices and manufacturing methods with lower carbon footprints.

Navigating Carbon Tariffs in Trade

• With carbon-related tariffs like CBAM (Carbon Border Adjustment Mechanism) impacting trade, businesses must consider both domestic and international consequences.
• Due to the complexities of trade, accurately predicting these impacts is difficult.
• Regulatory authorities should closely monitor the carbon credit market to ensure its smooth operation and create systems to manage these complexities.

As India strives for a net-zero future, decarbonizing industry activities becomes crucial. Industry leaders in carbon management and clean energy solutions can be instrumental in this transition. By aiding India in shifting from fossil fuels to clean energy, they contribute to the critical balance between economic growth and environmental responsibility. A robust carbon trading mechanism is essential for a sustainable future.

Source: Indian Express

Mains Question

Explain the role of the Indian Carbon Market (ICM) and its potential impact on India’s efforts to reduce emissions intensity and meet its climate commitments?