What The BRICS Carbon Market Partnership Needs, Pg6

Key Highlights:

• The 18th BRICS Summit in New Delhi confirmed commitment to the BRICS Carbon Markets Partnership through a Memorandum of Understanding.
• The partnership currently focuses on capacity-building and experience-sharing, lacking a trading framework, targets, or timeline.
• India's BRICS presidency aims to operationalize the partnership by establishing a common rulebook rather than a common trading platform.
• Eight BRICS members operate voluntary carbon markets, with Brazil, China, India, and Indonesia hosting over a third of global carbon credit projects.
• The European Union’s Carbon Border Adjustment Mechanism (CBAM), effective January 2026, and a similar UK mechanism, create urgency for a common BRICS framework.

BRICS Carbon Market.jpg

Detailed Insights:

• National carbon markets within BRICS, like China's Emissions Trading System (ETS) and India's Carbon Credit Trading Scheme (CCTS), are maturing but remain unlinked.
• Divergences exist in allocation methods, with China and India using output-based intensity benchmarks, while Brazil establishes an absolute emissions cap.
• Offset-credit rules are inward-looking, with each country typically accepting only its own certified credits or specific project types.
• The legal status of carbon units varies significantly across BRICS nations, impacting cross-border recognition and trade.
• A common framework for Measurement, Reporting and Verification (MRV) is identified as the partnership's crucial first deliverable.
• The New Delhi Declaration did not explicitly carry forward the 2025 Principles for Fair, Inclusive and Transparent Carbon Accounting.
• A BRICS rulebook would establish common monitoring rules, mutually recognize verifiers, and harmonize registry data fields.
• A pilot exchange project, leveraging Article 6.2 of the Paris Agreement, could facilitate bilateral transfers of mitigation outcomes.
• Such a pilot would expose operational frictions related to corresponding adjustments, capital account regulations, and legal classification of carbon units.
• The New Development Bank could potentially host a shared registry data facility or a purchasing facility for pilot units.
• Full linkage of compliance markets is deemed unlikely and undesirable currently due to diverging interests and complexities.

Key Concepts Involved:

• BRICS Carbon Markets Partnership: An initiative among BRICS nations to collaborate on carbon market development, initially focusing on capacity building.
• Emissions Trading System (ETS): A market-based approach to control pollution by providing economic incentives for achieving reductions in emissions.
• Carbon Border Adjustment Mechanism (CBAM): An EU policy imposing a carbon price on imports of certain goods to prevent carbon leakage and encourage cleaner production globally.
• Measurement, Reporting and Verification (MRV): A system for tracking, documenting, and independently checking greenhouse gas emissions or reductions.