With multiple international climate change treaties emphasising the importance of carbon reduction, Indian markets have slowly seen companies crop up in the domain over the last decade. With the Narendra Modi government recently announcing a legislative mandate for carbon trading in the country, a sudden surge of trading companies has been visible.
Recap to Present
Carbon trading formally started with the Kyoto Protocol of 1997. Under this protocol, the Clean Development Mechanism (CDM) was established. The CDM enabled industrialised nations to earn certified emission reduction (CER) credits through projects in developing countries. CERs can be traded or sold, allowing industrialised countries to meet their targets under the Kyoto Protocol. For such projects, India was the second largest market after China.
The Paris Agreement of 2015, which reaffirmed carbon credits of the Kyoto protocol, needed countries to set up their national actions called Nationally Determined Contributions (NDCs) to build resilience to adapt to a changing climate. In 2015 India set its first set of NDCs. In August 2022, the country recently submitted an updated version of its NDCs, which was met with criticism and a positive response. Since its conception, the CDM has helped countries like India to reach closer to their NDCs due to multiple renewable project initiatives.
Current Scenario
During 2010-2022, India issued 35.94 million carbon credits (17% globally). At the same time, companies focussing on carbon audit/offset/ ESG have exploded in the market, which signifies the importance the carbon market has gained in the country.
Post streamlining its NDCs in 2022, the power and renewable energy minister stated that India would ban the export of carbon credits from meeting its climate goals. The idea is to build a domestic market focusing on the energy sector. It will allow the central government/ authorised agencies to issue carbon certificates through the energy conservation (amendment) bill, 2022. The parliament passed the bill in December 2022 amid concerns from the opposition criticising the government for lack of clarity.
Why Would India be a Viable Market?
According to a 2022 article published by the Science Journal, the world must pay attention to the following:
It is offsetting methane along with carbon emissions, besides building better relations and sharing project benefits with local communities to increase accountability and scaling carbon projects to the regional level instead of scattered projects that possibly overshoot emissions claims.
India has a vast diaspora of communities that focus on the protection of land. Based on the Science journal study, encouraging and promoting the inclusion of local communities in carbon offset projects would be promising. These populations have been protecting their land for generations, and building on their knowledge could prove feasible in the long run.
Also, the World Resource Institute (WRI) states that the Indian carbon market can help bring out developmental benefits by creating jobs, improving health benefits, and implementing policy, which could help with long-term predictability, boost competitiveness and open up opportunities for MSMEs.
Although a lack of transparency or a timeline for implementation of the energy bill is unavailable, the Indian government plans to make carbon trading compliance- and voluntary-based restricted to the Indian market. Proper interconnection of policy implementation, accountability, and knowledge building could help India counteract a substantial amount of its carbon emissions. The country must adopt scientifically-backed methods of reducing carbon output, and carbon sequestration should also allow for long-term resilience, or else emissions and offsetting could become an endless loop proving meaningless in the long run.
The Current Carbon Companies:
After reviewing several companies in the Indian market, we at ecoHQ saw that most companies provide vague representations of the work done. For example, some promote the idea of planting trees for emission reduction. But there will never be sufficient trees to offset all the carbon emitted. Then there are some promoting net zero which is both dangerous and misleading. It enables an attitude of ‘burn now, pay later’. We also found companies claiming to have relevant experience in the field without proper practical experience or sufficient educational background. Possibly, they possess fundamental knowledge and skills, but the claims made are pretentious and set up unexpected standards.
Currently, India has no substantial laws to monitor the local carbon markets. We identified that most sites are a bit obscure, lack transparency and do not provide clear insights on several questions, such as:
- How have international standards, such as GRI, TCFD etc., been helpful or not?
- How have these standards evolved over the years?
- How do changes in these standards affect company operations?
- How are they localised to the Indian markets?
- How do they affect Indian markets?
It also begs the question: Are these companies third-party verified? If so, where can the public access those reports?
Ultimately it paints a picture that these companies providing carbon solutions need to do their research correctly, or they are in it only for the money.
At the end of the day, we need proper legislation to monitor companies’ operations and guide ESG/carbon audit firms with a localised structure to conduct their operations. At the same time, companies requesting support to transition to more sustainable operations should be held accountable. They should not be promoting themselves as supporters of climate change just as propaganda for marketing. Public and private stakeholders must ensure that companies internally track, communicate, act, identify, and rectify issues.
Credits
Deepa Sai strategised this article and took two years to do the preliminary research/study on Indian companies in the carbon market.
This article is authored by Ronniya who is a recent Environmental Studies and Sustainability Science graduate from Lund University. She enjoys reading, cooking and identifying solutions to reduce her carbon footprint. She previously volunteered as a board member at a farmers’ organisation in south Sweden along with being a board member for a student organisation on sustainable lifestyle. She has also worked in the e-waste recycling sector in India.