Investigating whether GoI can implement policies for National carbon market to work in India

Abstract

India at 26th United Nations Climate Change Conference (COP-26) held at Glasgow committed net-zero carbon emissions (NZE) by 2070. With business as usual, it is estimated that carbon emissions in India would be 4.48 Gt in 2030. According to IPCC report, to achieve carbon neutrality in 2070, India should be at peak of GHG emissions by 2030, to avoid overshooting the 1.5"C target set in Paris Agreement. As per our estimate, India needs to reduce an aggregate of around 16 billion tonne emissions by 2030 which is 39.48% or (around 40%) reduction of the existing levels for 2070 NZE. This is in sync with the Nationally determined contribution (NDC), where India committed to reduce 43% GHG emissions by 2030. Carbon market can be an efficient tool to achieve these targets in the next decade and India is set to launch its first domestic carbon market soon. The aim of this project is to investigate whether Carbon market can function successfully in India and give recommendations for the same. To identify the best practices and potential pitfalls in the carbon market, we extensively studied the European Emission trading system, the China domestic carbon market, Indian COM projects, Surat Particulate Trading market and Perform, Achieve and Trade (PAT) scheme. We established that, a floor price of carbon credit is essential for carbon market to function, as market clearing price has been low in the previous decade for all the carbon markets due to over-supply of carbon allowances. The floor price of INR 1280.50 for carbon credit in the Indian market to achieve 40% reduction by 2030, is estimated basis the Germany's carbon credit price and achieved reductions in the previous decade. Finally, recommendations about which sectors to target, allocation of carbon allowance, monitoring of GHG emissions and compliance are made for a well-functioning carbon-market in India.