Corporate sector can cut emission intensity of GDP by further 5.6% in 2030

A carbon market that covers India's industrial sector and sets targets aligned with the average ambition level of the existing voluntary commitments by the Indian corporate sector has the potential to reduce the emissions intensity of GDP by an additional 5.6 per cent in 2030 compared to a current policy scenario, said a carbon market simulation study. 

The reduction is equivalent to a cumulative reduction of 1.3 billion metric tons of carbon dioxide equivalent (MMTCO2e) between 2022 and 2030, according to the study titled ‘Leveraging carbon markets for cost-efficient emissions reductions in India’ by the World Resources Institute (WRI). At COP26, India announced its ambition of reducing the emission intensity per unit GDP by 45 per cent by 2030 and achieving net zero by 2070. India also announced that it aims to reduce 1 billion metric tonnes of carbon emissions by 2030.

The study, implemented in 2020-21, included 21 large Indian businesses, representing about 10 per cent of India's industry emissions, and all elements of a carbon market demonstrated a 28 per cent reduction in the total cost of emissions reductions.

The findings from the report on the study were shared at the Business 20 (B20)-Think20 (T20) convening in Mumbai on Wednesday. B20 and T20 are the official engagement groups of the G20. 

“This study draws on 15 years of international experience with carbon markets and 10 years of domestic experience with MBMs; consultations with large Indian businesses to understand the needs, challenges, and perspectives of the Indian industry; and a first-of-its-kind simulation of a carbon market,” WRI India said in a statement. 

According to the World Bank (2021), carbon markets now cover 16 percent of global emissions.

With a carbon market, India has at its disposal an instrument that can provide the right policy and price signals to incentivise deep decarbonization from the industry sector while ensuring global competitiveness, the report highlights. 

“Our analysis shows that a well-designed carbon market can potentially also reduce costs of emissions reductions and mobilise finance needed for decarbonization of the MSME sector.” Ashwini Hingne, senior manager, WRI India who led the research study.

The Bureau of Energy Efficiency will administer India's carbon trading framework, which is getting ready for its rollout. 

Abhay Bakre, Director General, Bureau of Energy Efficiency, said as economies mature, if aggressive efforts to mitigate emissions are to be achieved, carbon markets are one of the most cost-effective tools to do that. 

“By 2030, the Indian carbon market will be the leading market in the world. It will ensure that this market assists the industry in driving decarbonisation efforts while driving the cost of technologies down,” Bakre said.

To build a very robust framework for the carbon market in India, some very effective amendments to the Energy Conservation Act India were made and several stakeholder consultations were held in parallel. We will make sure the Indian market is at par with the international standards. We are also building a pool of verifiers and a robust electronic platform to register projects, manage credits etc and this will build better confidence among industries, Bakre added. 

In December last year, the Parliament passed the Energy Conservation (Amendment) Bill, 2022. The Bill amended the Energy Conservation Act, 2001, to empower the Government to establish carbon markets in India and specify a carbon credit trading scheme. 

On February 17, the government announced a list of 13 activities that will be considered for trading of carbon credits under Article 6.2 mechanism to facilitate transfer of emerging technologies and mobilise international finance in India.

By implementing domestic market-based mechanisms to promote energy efficiency and renewable energy over the last decade, namely, the Perform, Achieve, Trade (PAT) and

Renewable Energy Certificate (REC) schemes, respectively, India has been able to create some institutional capacity for operationalizing MBMs, the report said. 

Ravi Pandit, Chairman and Co-founder, KPIT Technologies said, “Industries are at the opportune time to lead the way to the decarbonisation efforts. Carbon trading is an efficient and effective way of reducing emissions. Our study shows that the cost of mitigation comes down by approximately 28 per cent. It is important to focus on the design, management, and capacity building.”

India’s carbon market can give businesses a clear policy signal to shift investments toward low carbon technology. This should also be accompanied by an emissions reporting program and targeted capacity building to prepare Indian industry” Ulka Kelkar, Director of the Climate Program at WRI India.

Reflecting on the need for international uniformity as countries announce their own carbon markets, Dr Riza Suarga, Chairman, Indonesia Carbon Trade Association said, “Indonesia is planning to release a carbon exchange by mid this year. Indonesia also plans to conduct cross- sectoral carbon trading.”