The union government of India approved India’s first domestic regulated carbon market under the Carbon Credit Trading Scheme in a gazette notification on July 1, 2023. The programme also calls for the establishment of a National Steering Committee to oversee the operation of the Indian carbon market.

The National Steering Committee has been given critical responsibility for the formation and consolidation of the Indian carbon market. Its principal function is to make expert advice for the creation and finalisation of procedures necessary for the institutionalisation of this market. These procedures include developing particular greenhouse gas emission objectives for organisations required to comply, as well as requirements for trading carbon credit certificates outside of India.

Furthermore, the committee is authorised to supervise the issuing of carbon credit certificates and to play a key role in the design of processes and conditions relating to the crediting term, renewal, or expiry of these certificates. It is also in charge of overseeing the operations and functions of the Indian carbon market.

What exactly is carbon credit?
1. A carbon credit is a financial instrument representing the reduction or elimination of greenhouse gas (GHG) emissions from the environment. It is a metric for quantifying the amount of carbon dioxide or other greenhouse gases offset or mitigated by a project or activity.

2. Carbon credits are based on the premise that GHG emissions contribute to climate change and global warming. Countries and organisations have implemented systems such as carbon trading and carbon offsetting to solve this issue. Carbon credits are crucial in these procedures.

3. Carbon credits can be generated when a project or activity minimises or eliminates the emission of greenhouse gases. These credits can be traded or sold on the carbon market. The credits can subsequently be used to offset the buyer’s own emissions. This enables organisations or individuals to take charge of their carbon footprint by investing in projects that cut emissions elsewhere.

4. Typically, each carbon credit represents one metric tonne of CO2 or its equivalent in other greenhouse gases.

5. Carbon credits are intended to provide economic incentives for lowering greenhouse gas emissions and promoting sustainable practises. By placing a financial value on carbon emissions, carbon credits encourage businesses and individuals to invest in emission reduction projects, ultimately contributing to the global effort to combat climate change.

Why is it important?

1. Improved Climate Action: It enables the government to establish explicit emission reduction targets and to develop a market-based framework for meeting those targets. It encourages corporations and industries to actively participate in emission reduction efforts by putting a price on carbon and developing a trading market.

2. Emission Reduction at a Low Cost: A regulated carbon market is a low-cost way to achieve emission reduction goals. It enables businesses to select the most efficient and cost-effective strategies for lowering emissions. Companies that can reduce emissions at a lower cost can sell excess credits to those facing higher prices, ensuring that emissions reductions are achieved at the lowest total cost to the economy.

3. Encouraging Innovation and Investment: A carbon market that is well-regulated encourages innovation and investment in clean technologies and sustainable practises. It provides a financial incentive for businesses to invest in low-carbon solutions, energy efficiency initiatives, and renewable energy projects. This, in turn, promotes economic growth, job creation, and the emergence of a green economy.

 

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