Subject: Environment and Ecology

The interplay between carbon credits and clean development mechanisms (CDMs) has gained significance as India balances its economic aspirations with environmental commitments. Despite the recent decline in carbon credit values to $4.8 per ton in 2024, these market-based instruments remain crucial for achieving sustainable development goals and emission reduction targets.

Reasons to Maintain Carbon Credits and CDMs

Economic Benefits and Market Potential:

• The global carbon market is projected to reach $7-$35 billion by 2030 and $250 billion by 2050, indicating substantial growth potential despite current price fluctuations.
• India's Energy Conservation (Amendment) Act 2022 provides a legal framework for carbon markets, enabling economic opportunities through carbon credit trading.
• The Carbon Credit Trading Scheme (CCTS) focuses on emissions intensity, benefiting nine energy-intensive industrial sectors.

Environmental Imperatives:

• Helps achieve India's commitment to reduce emission intensity under the Paris Agreement.
• Supports the transition towards renewable energy capacity target of 500 GW by 2030.
• Facilitates technology transfer and sustainable development through Clean Development Mechanisms.

Alignment with India's Energy Needs

Current Energy Scenario:

• India's installed renewable energy capacity is expected to reach 170 GW by March 2025.
• Coal still dominates with over 55% of primary energy consumption, highlighting the need for transition mechanisms.
• The National Green Hydrogen Mission aims for 5 MMT production by 2030, demonstrating commitment to clean energy.

Strategic Benefits:

• Enables gradual transition from fossil fuels while maintaining economic growth.
• Attracts international investment in clean energy projects.
• Creates additional revenue streams for sustainable development initiatives.

Way Forward

Policy Recommendations:

• Strengthen domestic carbon market infrastructure.
• Develop sector-specific emission reduction targets.
• Integrate carbon pricing with renewable energy initiatives.

India's pursuit of carbon credits and CDMs, despite price volatility, remains essential for balancing energy security with environmental sustainability. The framework established by the UNFCCC provides crucial support for India's transition to a low-carbon economy while ensuring sustainable economic growth through mechanisms like the National Green Hydrogen Mission and Carbon Credit Trading Scheme.