Context:- India, according to the Centre for Science and Environment (CSE), contributes significantly to the global carbon credit pool, representing a substantial presence in carbon investment and sustainability efforts worldwide.

About Carbon Credits:

The mechanism of carbon credits forms a crucial part of combating climate change. Projects that effectively curtail greenhouse gas emissions are rewarded with these credits, quantified in carbon dioxide-equivalent (CO2e) units, subsequently available for trading.

Businesses and individuals looking to offset their emissions can purchase these credits, effectively neutralizing their carbon footprint and contributing to environmental conservation.

What Are Carbon Credits and its measurement?

Carbon credits, also known as carbon offsets, are permits that allow the owner to emit a certain amount of carbon dioxide or other greenhouse gases. One credit permits the emission of one ton of carbon dioxide or the equivalent in other greenhouse gases.

Varied Carbon Markets:

Two primary categories define carbon markets: compliance and voluntary. Compliance markets result from national or international regulations, while voluntary markets operate on an opt-in basis.

Currently, the supply of voluntary carbon credits predominantly arises from private initiatives developing emission reduction projects, aligning with various carbon standards.

Evolution of Carbon Trade Agreements:

Carbon trading agreements aim to reduce overall emissions by facilitating the sale and purchase. Many nations and regions have initiated carbon trading programs, inspired by the success of cap and trade strategies that addressed sulphur pollution in the 1990s.

Post the Glasgow COP26 conference in 2021, the global carbon market framework under Article 6 of the Paris Climate Agreement gained structure. This framework encompasses a centralized system for public and private sectors and a bilateral system for nations to exchange carbon offset credits to meet emission targets.

Concerns and Prospects:

However, the newfound rules permit the use of previous credits between 2013 and 2020, raising concerns about market saturation and price impacts. Nonetheless, provisions in the agreement dictate the allocation of 5% of proceeds towards assisting developing countries in climate change mitigation and the cancellation of 2% of credits to ensure an overall emission reduction.

Presently, while an ‘official’ carbon market is yet to be established, ongoing global discussions aim to define the rules governing such trades. Advocates of this framework emphasize its potential to incentivize countries and corporations towards emission-reduction technologies and initiatives, like carbon capture systems and afforestation, ultimately contributing to atmospheric carbon reduction.

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