India-Japan Joint Crediting Mechanism: Meaning and Rules

Overview

The India-Japan Joint Crediting Mechanism operationalises bilateral carbon trading under Article 6.2 of the Paris Agreement. It gives India access to advanced Japanese low-carbon technologies while generating high-integrity Internationally Transferred Mitigation Outcomes (ITMOs). This structure speeds up industrial decarbonisation without undermining national climate targets.

Both nations execute mitigation projects jointly. They split verified carbon credits according to their financial and technical contributions. Unlike legacy offset programmes, this bilateral route applies strict accounting safeguards that deduct transferred mitigation outcomes directly from the host nation's balance.

The framework unlocks vital co-financing for capital-heavy sectors like green hydrogen, carbon capture, and industrial retrofits. Bilateral climate finance ties directly into India's long-term emissions trajectory.

The operationalisation of the India-Japan Joint Crediting Mechanism took a decisive step forward on June 8, 2026. On this date, both governments officially adopted the bilateral Rule of Implementation under Article 6.2.

As of June 2026, this bilateral framework sets clear procedures for registering projects, approving methodologies, and issuing carbon credits between both nations. The timeline developed through key milestones:

• August 7, 2025: The Ministry of Environment, Forest and Climate Change (MoEFCC) of India and the Government of Japan signed the foundational Memorandum of Cooperation.
• August 29, 2025: Both nations formally exchanged the memorandum during the India-Japan Summit.
• June 8, 2026: Both nations adopted the formal Rule of Implementation.

Bilateral market mechanisms under Article 6.2 provide a targeted route for decarbonisation finance and technology transfer. They move carbon markets away from cheap unilateral offsetting towards verified, shared mitigation outcomes.

The Joint Crediting Mechanism is a bilateral project-based crediting system initiated by the Government of Japan. Its core aim is to diffuse leading low-carbon technologies across partner countries.

India became the 31st partner country globally to sign a bilateral JCM agreement with Japan. A bilateral Joint Committee governs the mechanism. Formed by designated representatives from both governments, it sets operating rules, approves baseline methodologies, and verifies credit allocations.

Under Section 3(a) of the bilateral Rule of Implementation, the India-Japan JCM covers seven major greenhouse gases:

• Carbon dioxide (CO2)
• Methane (CH4)
• Nitrous oxide (N2O)
• Hydrofluorocarbons (HFCs)
• Perfluorocarbons (PFCs)
• Sulphur hexafluoride (SF6)
• Nitrogen trifluoride (NF3)

Verified emission reductions from registered projects are split quantitatively between Indian and Japanese participants. These credit allocations reflect their respective financial, technical, and viability-gap contributions.

Article 6.2 of the Paris Agreement provides the international legal foundation for voluntary cooperative approaches. It allows countries to trade Internationally Transferred Mitigation Outcomes (ITMOs) across borders.

Unlike centralised multilateral markets governed by international executive boards, Article 6.2 relies on decentralised bilateral cooperation. It operates under international transparency standards set by Decision 2/CMA.3 of the Glasgow Rulebook. The framework grants participating nations sovereign flexibility:

• Bilateral Rulemaking: Governments design crediting structures tailored to shared industrial priorities.
• Sector Targeting: Host nations direct foreign investment to hard-to-abate sectors.
• Sovereign Authorisation: Host nations issue formal approvals before any credit leaves domestic registries.

In India, the National Designated Authority for the Implementation of the Paris Agreement (NDAIAPA), operating under the MoEFCC framework, serves as the apex regulatory body. The NDAIAPA evaluates project proposals and defines priority sectors. It issues formal bilateral authorisations before any mitigation outcome can be transferred abroad as an ITMO.

The operational lifecycle of a JCM project requires structured project documentation, rigorous third-party auditing, and bilateral Joint Committee approvals before credits are issued.

According to the Asian Development Bank's project handbook, every JCM initiative proceeds through six sequential stages:

1. Methodology Development and Approval: Developers draft baseline methodologies demonstrating emissions reductions below business-as-usual levels, which the Joint Committee reviews and approves.
2. Project Design Document (PDD) Preparation: Developers prepare a formal PDD detailing project boundaries, technology specifications, monitoring parameters, and emission calculation algorithms.
3. Third-Party Validation: An accredited independent Third-Party Entity validates the PDD against JCM standards and baseline methodologies.
4. Project Registration: Following successful validation, the bilateral Joint Committee formally registers the facility as an official JCM project.
5. Monitoring, Reporting, and Verification (MRV): The project operator monitors emissions data according to the approved plan, producing a periodic monitoring report for independent verification.
6. Credit Issuance and Allocation: The Joint Committee evaluates the verified report, determines final emission reductions, and requests both governments to issue the designated credit shares into their national registries.

Corresponding Adjustments form the foundational accounting mechanism that prevents double counting when ITMOs are traded internationally.

Under United Nations Framework Convention on Climate Change guidelines, double counting occurs if both host and buyer nations count the same mitigation outcome toward their Nationally Determined Contributions (NDCs). Two core safeguards prevent this overlap:

• National Inventory Adjustment: When India transfers ITMOs to Japan, India must apply a positive adjustment to its national balance. This adds the exported emissions back to India's national greenhouse gas inventory.
• Registry Interoperability: Both countries track the lifecycle, issuance, holding, and transfer of ITMOs through connected electronic national registries.

These digital platforms ensure transactions comply with the UNFCCC Agreed Electronic Format (AEF) annual reporting standards. They guarantee that credits transferred abroad are not claimed under domestic decarbonisation mandates.

The bilateral architecture of Article 6.2 JCM resolves structural accounting deficiencies that characterised the Kyoto Protocol's Clean Development Mechanism.

Under the legacy CDM framework, developing nations faced no binding reduction targets and were not required to adjust their national accounts when selling Certified Emission Reductions (CERs). In contrast, the Paris Agreement binds all signatories to NDCs, making strict bilateral governance and accounting adjustments mandatory.

The India-Japan JCM provides financial support and technological access to accelerate the decarbonisation of India's capital-intensive industrial sectors.

A central advantage of the mechanism is upfront capital subsidisation. The Japanese government structures JCM support to deliver co-financing of 30% to 50% of initial capital expenditures for eligible low-carbon technology deployments. This concessional viability funding lowers hurdle rates for Indian enterprises adopting expensive, cutting-edge systems.

The Ministry of Environment, Forest and Climate Change has prioritised several critical industrial sectors for Article 6.2 bilateral collaboration:

• Green hydrogen generation and distribution infrastructure
• Green ammonia production for fertiliser and maritime use
• Compressed biogas (CBG) processing plants
• Carbon capture utilisation and storage (CCUS) facilities
• High-efficiency industrial heating, smelting, and manufacturing retrofits

These priority areas ensure that international carbon finance directly strengthens industrial productivity rather than funding low-additionality offsets.

Deploying bilateral carbon trading under Article 6.2 requires navigating complex trade-offs between international credit exports and domestic NDC compliance.

Key structural and institutional hurdles include:

• NDC Compliance Risks: Corresponding Adjustments require India to add exported ITMOs back to its emissions total. Exporting high volumes of low-cost mitigation credits abroad could raise the domestic cost of achieving India's own NDC targets.
• Abatement Cost Traps: If India exports low-hanging abatement outcomes, domestic industries may later face higher marginal abatement costs to meet national decarbonisation goals.
• Registry Integration Hurdles: As reported by Carbon Pulse on September 28, 2026, Indian authorities have been developing a dedicated digital module within domestic carbon market infrastructure to handle Article 6.2 authorisations and manual tracking workflows.
• Cross-Border Interoperability: Real-time interoperability between Indian digital platforms and Japan's JCM registry remains essential to prevent tracking delays and administrative bottlenecks.

India can maximise the strategic value of the Joint Crediting Mechanism by establishing clear sector thresholds, protecting national mitigation reserves, and expanding institutional capacity.

First, the NDAIAPA should restrict ITMO exports exclusively to hard-to-abate sectors where domestic public capital is insufficient and foreign advanced technology is indispensable, such as CCUS and green hydrogen. High-volume, low-cost domestic mitigation activities should remain reserved for India's domestic carbon market to meet national NDC pledges affordably.

Second, regulatory bodies must fast-track the integration of national electronic registries with international UNFCCC tracking formats. Establishing clear domestic MRV protocols and training accredited third-party validation agencies will minimise administrative frictions, making India a global benchmark for high-integrity Article 6.2 bilateral partnerships.

• India and Japan operationalised their bilateral Joint Crediting Mechanism by adopting formal Rules of Implementation under Article 6.2 on June 8, 2026.
• The framework is governed by a bilateral Joint Committee, with India's NDAIAPA acting as the national authority to authorise projects and ITMO transfers.
• The JCM covers seven key greenhouse gases: CO2, CH4, N2O, HFCs, PFCs, SF6, and NF3.
• Mandatory Corresponding Adjustments require India to adjust its emissions balance upon exporting ITMOs, preventing double counting across NDCs.
• Japan provides 30% to 50% capital co-financing to deploy advanced low-carbon technologies in priority sectors such as CCUS, green hydrogen, and industrial efficiency.