India’s Carbon Market Gets Global Green Light at COP29

As discussions progress at COP29 in Baku, Azerbaijan, India’s vision for a regulated carbon market is gaining momentum through proposed frameworks under Article 6.4 of the Paris Agreement. Currently under negotiation, these provisions would enable nations to engage in global carbon credit trading, fostering a united approach to reducing emissions. For India, this framework could accelerate the launch of its carbon market, paving the way for crucial international investments in renewable energy, green technologies, and other climate-focused projects. With these developments, India stands poised to attract global funding for its ambitious climate goals while addressing the distinct challenges of a developing nation.

UN Accord: A Green Light for India’s Carbon Market

India’s carbon market ambitions gained traction with new rules ratified at COP29, held in Baku, Azerbaijan. These rules, part of Article 6.4 under the Paris Agreement, allow nations to trade carbon credits in a global marketplace. The move aims to ensure that carbon reduction projects meet stringent, measurable standards, potentially attracting foreign investment into India’s green initiatives. Dhruba Purkayastha, director of growth and institutional advancement at the New Delhi-based think tank CEEW, stated, “This is a positive step toward realizing the full potential of Article 6.4, but further efforts are required to guarantee its robust and effective implementation.”

The Indian government has faced delays in structuring its carbon market, primarily due to pending global agreements on market frameworks. With the COP29’s resolution, India can move forward, targeting late 2025 or 2026 for market launch. India hopes to channel much-needed funds toward affordable climate action by aligning its market with the UN’s global standards.​

Article 6: Key Provisions and Market Impact

Article 6, introduced in 2015 at the Paris Climate Conference, outlines mechanisms for countries to meet emissions targets through international cooperation. Under Articles 6.2 and 6.4, countries can trade credits to offset emissions, which drives global investments in emission reduction projects. This structure offers an appealing avenue for developing nations like India to access funds and technologies essential for decarbonisation.​

The recent COP29 decision includes a provision to avoid double-counting credits, ensuring transparency and fairness. This market framework is expected to reduce global implementation costs by $250 billion annually. Nevertheless, critics like Climate Action Network (CAN) argue that while carbon markets may aid some investments, they are not the primary solution for developing nations’ extensive climate finance needs​.

India’s Path Forward in the Carbon Market

India’s commitment to establishing a carbon market is part of a larger goal to meet its Nationally Determined Contributions (NDCs) under the Paris Agreement. By fostering a robust carbon market, India could unlock investments in green technologies and renewable energy sectors. The Bureau of Energy Efficiency has been tasked with operationalising this framework, though questions remain on domestic regulatory processes.​

This market mechanism, once functional, would enable Indian companies to use carbon credits for compliance and encourage more sustainable practices across industries. However, Jagjeet Sareen of Dalberg Advisors points out that such markets only partially address India’s financing challenges, underscoring the need for additional climate finance channels.​

Challenges and Criticisms of Article 6

While Article 6 brings hope for cross-border cooperation on climate finance, it has controversies. Wealthier nations, including the UK and the US, view Article 6 as a milestone, similar to COP28’s loss-and-damage fund. Yet, sceptics argue that carbon markets may inadvertently allow wealthier nations to underplay their direct emissions reductions by purchasing credits. Despite these concerns, the framework offers a clear path for developing countries like India to fund their green transitions, albeit as part of a broader solution.​

As India works to build a robust carbon market in line with UN guidelines, the COP29 agreement represents a significant step toward integrating global and domestic climate goals. By leveraging these developments, India aims to address local and international emissions reductions, laying the groundwork for a sustainable future.

References:
https://www.thehindu.com/news/international/cop29-adopts-establishment-of-global-carbon-market-under-paris-agreements-article-6/article68858651.ece

https://www.business-standard.com/india-news/cop29-agreement-lights-fuse-for-india-s-carbon-market-ambitions-124111201415_1.html

https://unfccc.int/process-and-meetings/the-paris-agreement/article-64-mechanism#:~:text=What%20is%20the%20Paris%20Agreement,and%20benefit%20from%20these%20activities.

https://unfccc.int/news/cop29-agrees-international-carbon-market-standards

https://beeindia.gov.in/en/programmes/carbon-market

https://www.weforum.org/stories/2023/12/cop28-loss-and-damage-fund-climate-change

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