The India Story

India, the world’s third-largest emitter of greenhouse gases, faces growing climate vulnerabilities from extreme weather events. In response, the government has committed to reducing emission intensity by 45% by 2030 (from 2005 levels) as part of its updated Nationally Determined Contributions (NDCs). A key policy move in this direction is the phased development of a national carbon market, as outlined in a March 2023 paper by the Bureau of Energy Efficiency. This initiative aims to align India’s climate policies with market-based incentives while responding to international regulatory pressures like the EU’s Carbon Border Adjustment Mechanism (CBAM), which could impact India’s export competitiveness.

Building on the Perform, Achieve, and Trade (PAT) and Renewable Energy Certificates (REC) experience, India plans to create a carbon trading system using GHG-denominated, globally aligned, tradeable units. Digital Measurement, Reporting, and Verification (MRV) systems will be essential to ensure transparency and attract credible investments. Early engagement with the private sector, demand creation for high-quality carbon credits, and integration of rural and informal sectors can boost participation. A robust voluntary carbon market can drive investment in clean energy, e-mobility, resource-efficient tech, and sustainable agriculture, accelerating India’s low-carbon transition.

This report analyses global trends and India’s evolving carbon market framework, offering strategic recommendations for government, industry, and finance actors. It emphasizes the importance of coordinated action and financial innovation to unlock capital flows, strengthen climate resilience, and achieve sustainable economic growth.