Carbon Credit and upcoming COP-29

Syllabus:

  • GS 3: Environment

Why in the News?

Upcoming COP29 in Baku, Azerbaijan from 11 -22 November to 2024 will focus on climate finance and the carbon credit scheme, highlighting India’s initiatives and challenges in establishing a credible and efficient domestic carbon market.

Carbon Credit and upcoming COP-29

Introduction

  • Climate finance and a global carbon credit system will be discussed at the 29th Meeting of the Parties (COP-29) in Baku, Azerbaijan.
  • India’s revised climate policy, which outlines domestic carbon markets under the Energy Conservation (Amendment) Act 2022, aims to align Paris Agreement commitments with economic objectives, which require planning well-designed, transparent and reliable framework.
  • India needs to draw two key lessons from global experiences to design a sustainable and effective carbon market system in the long run.

Carbon Credit Integrity and India

Relevance of carbon credit integrity

  • The strength of a carbon market depends on the credibility and reliability of its carbon credits.
  • Globally, poor accountability in carbon credits, especially in voluntary markets (VCMs), has led to green laundering/washing.
  • The study found that environmental benefits were amplified in some sectors, particularly in the forestry sector.

Risks associated with Indian carbon market

  • India’s voluntary carbon market introduced under the Green Credit Program (GCP) could face similar issues.
  • The GCP’s tree planting guidelines have faced criticism for encouraging unscientific methods, raising concerns about greenwashing.
  • Under the Carbon Credit Trading Scheme (CCTS), there are fears that some projects may not be adding any additionality and have “redundancy”, meaning that emissions reductions may not continue.

What are the Solutions to these challenges?

  • India needs to implement robust policies to ensure carbon credits are genuine.
  • Establishing a national registrar would help track credit claims and prevent double counting.
  • Monitoring by Independent third party should be encouraged, assessing the shrinkage and sustainability of each business, based on the best practices of organizations such as IETA and the Gold Standard.
  • By adopting these standards, India can be a credible market that attracts both domestic and international investment.

International Compliance and India

  • India’s carbon market aims to align with international standards, especially Article 6 of the Paris Agreement.
  • Article 6.2 enables countries to meet climate targets through International Mitigation Measures (ITMOs), emphasizing the importance of compliance.

Encouraging Environmental Equity

  • At COP26 in Glasgow, the Article 6 rulebook was finalised, providing clear guidelines for carbon trading while maintaining environmental integrity.
  • To avoid issues like double counting, the Indian carbon market needs to put together a transparent mechanism to monitor emission reductions and carbon credits.

Alignment and its benefits

  • Aligning with global best practices, India can meet its climate commitments and safeguard national interests.
  • Transparent policies can help India effectively contribute to global emissions reduction and attract international investors.

Security is important in carbon markets

  • World Bank report on Article 6 mechanisms highlights the dangers of double-accounting and the need for stricter standards in carbon markets.
  • Improved governance, integrity and accountability will ensure that substandard loans do not undermine India’s global climate goals, saving market confidence and environmental integrity.

Need for transparency to ensure compliance

  • Ensuring transparency is essential to maintain compliance and alignment with international carbon market standards.
  • The transparent system helps to certify the environmental integrity of India’s carbon credits by disclosing carbon reduction strategies, measures and other detailed project details on centralized platform

General disclosure

  • To reinforce accountability, it’s important to clearly share information about the project, including reports on third-party verification.
  • This enables transparent monitoring of projects in addition to verifying emissions reductions, and ensuring that credits reflect real, measurable climate benefits
  • Regular audits should also be conducted to ensure project sustainability, and these reviews are overseen by independent auditors approved by the Bureau of Energy Efficiency (BEE).

Role of the VCMI System

  • Voluntary Carbon Market Integrity Initiative (VCMI) has introduced a tiered process for verifying carbon credit claims, aimed at increasing transparency in the carbon market
  • There are challenges to implementing this initiative in the Indian Carbon Credit Trading Scheme (CCTS), including high costs associated with review, reporting and verification costs, which may discourage small businesses from participating in the initial stages

Moving to a mature carbon market

  • Though initially, India’s carbon credit system should introduce stringent norms and align with international best practices and domestic requirements.
  • Focusing on transparency and honesty will enable India to develop robust carbon markets, promote climate finance and support sustainable development efforts, and contribute to the national and global climate the goal has been achieved.

Conclusion

With its emphasis on transparency, openness and global alignment, India’s carbon credit system can also improve climate finance and sustainable development, while adhering to legitimacy and accountability environmental management.

Source: The Hindu

Mains Practice Question:

Explain the importance of carbon market integrity and transparency in India’s climate goals. How can India avoid greenwashing risks and ensure the credibility of its Carbon Credit Trading Scheme (CCTS)?