Carbon Credit Trading Scheme.

12 May 2023.


The Indian government is actively working towards decarbonising its economy and achieving ambitious climate goals. To facilitate this transition and promote sustainable practices, the Ministry of Power and the Ministry of Environment, Forests & Climate Change are collaborating to develop the Indian Carbon Market (ICM). This market aims to play a crucial role in reducing emissions and driving the adoption of clean technologies.

Objective: Decarbonisation of the Indian Economy

The primary objective of developing the Indian Carbon Market is to support the decarbonisation of the Indian economy. By pricing greenhouse gas (GHG) emissions through the trading of Carbon Credit Certificates, the ICM aims to incentivize industries and entities to adopt low-carbon pathways. This market-based approach encourages the transition towards cleaner and more sustainable practices, promoting a greener and more climate-resilient economy.

Collaboration Between Ministries

The Ministry of Power and the Ministry of Environment, Forests & Climate Change are collaborating closely to develop the Carbon Credit Trading Scheme. This partnership ensures a comprehensive and coordinated effort in addressing both the energy and environmental aspects of decarbonisation. By synergizing their expertise and resources, these ministries can drive effective policy implementation and create a conducive ecosystem for sustainable development.

NDC Goals and Emissions Intensity Reduction

India has committed to reducing the Emissions Intensity of its Gross Domestic Product (GDP) by 45 percent by 2030, compared to 2005 levels, as part of its Nationally Determined Contributions (NDC). The Indian Carbon Market will play a pivotal role in achieving this goal. By creating a competitive market for carbon credits, the ICM incentivizes entities to reduce their emissions intensity, contributing significantly to India’s climate targets.

Stakeholder Consultation and Accredited Carbon Verifiers

A stakeholder consultation on Accredited Carbon Verifiers was conducted as a part of the ICM’s development process. This consultation brought together Accredited Energy Auditors, Carbon/Energy Verifiers, Sector Experts, and other key stakeholders. The purpose was to discuss the role of Accredited Carbon Verifiers and gather insights to ensure a robust and credible carbon credit trading system.

Sectoral Focus and Performance-based Trading

  • The new Carbon Credit Trading Scheme under the ICM will focus on potential energy sectors in India.
  • To monitor progress effectively, sector-specific GHG emissions intensity benchmarks and targets will be developed.
  • Carbon credits will be traded based on the performance of entities against these sectoral trajectories. This approach ensures a fair and market-driven mechanism for emissions reduction, fostering sustainable practices across industries.

Methodologies and Governance Structure

The Indian Carbon Market will develop robust methodologies for estimating carbon emissions reductions and removals from registered projects. This includes validation, registration, verification, and issuance processes to operationalize the scheme effectively.

Additionally, the ICM will establish a comprehensive institutional and governance structure. This structure will define the roles and responsibilities of all stakeholders involved in executing the ICM, ensuring transparency, and promoting accountability.

Driving Climate Goals and Clean Technologies

The ICM is poised to play a crucial role in achieving India’s climate goals and promoting the adoption of clean technologies. By creating a competitive carbon market, the ICM incentivizes entities to reduce their GHG emissions at the least cost. This market mechanism encourages investment in sustainable projects, drives the adoption of clean technologies, and contributes to a low-carbon economy in India.

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