Institute of Management, Nirma University - Logo

The Carbon Credit Policy in Indian Market as a Tool for Reducing Emissions


To address the climate change policy, it is vital to discuss the strategies or global best practices adopted globally for resolving the issue. Not only is the state recognising the rights to a clean, healthy, safe, and sustainable environment but it is also working on the effective implementation of procedures for access and Goal 13 under the Sustainable Development Goals (United Nations, 2022). It is the responsibility of the State or national governments to introduce laws, policies, projects, programmes, and most importantly, the inclusion of public opinions via Public Participation concerning environmental impact. The massive role in constructing a narrative around reducing carbon emissions is on giant economies as well as on industries and corporates from the developed economies. Allocating necessary funds for ease of access to the technology and resources for climate change mitigation is a significant responsibility. Earlier during COP-27, many developing nations including India objected to the Mitigation Work Programme (MWP) (Guilanpour and Hucke, 2022) over the impact the said revision in the goal will have on implementation. This highlights the onus placed on developed economies such as the USA, Russia, EU and the UK, which are responsible for a larger share of historical emissions prior to the 1990s, compared to developing economies such as China, India, and other Asian countries.


Historically, India’s commitment to limiting carbon emissions and reducing greenhouse gases can be seen in the national law Energy Conservation Act, introduced in 2002. As a non-annex party, India ratified Kyoto Protocol in 2002. The Kyoto Protocol aimed to promote the principle of ‘common but differentiated responsibility’ and the latest amendment to the protocol directs countries to revise their respective targets. The concept of a flexible market mechanism was established under the Kyoto Protocol based on permits to trade emissions (United Nations Framework Convention on Climate Change, n.d.). It aims to encourage GHG abatement cost-effectively for developing countries. It presents an equal stage for the private sector and developing countries to participate in the reduction of emissions. Under the carbon market mechanism is Emission Trading which allows trading the surplus emission units (United Nations Framework Convention on Climate Change, 2022) (i.e., emissions permitted to each party). This led to the creation of a new commodity in the form of carbon emission removal. The Greenhouse Gas Abatement Cost Model (GACMO) (United Nations Environment Programme, n.d.) helped countries to calculate their future GHG emissions and hence credited in preparation for the National Determined Contribution (NDCs) to the Paris Agreements (United Nations Climate Change, 2022).


The ambitious commitments of the Indian Government to achieving its goals by 2030 are extensively elaborating targets to mitigate the climate change impact, especially by reducing the emission intensity of its GDP by 45% by 2030. According to the UN’s Emission Gap Report, the third largest emitter in 2020 (BBC, 2022), India’s primary emphasis is on renewable energy sources and introducing climate technology for advanced research(PIB, 2022). However, the report on India’s grandiose NDC was criticized (Climate Action Tracker, 2022) based on the absence of evidence on India’s continued use of coal and increased emission levels by nearly 6% (Basu, 2022). Thus, it is vital that state parties establish the emission trading system at the national level.


Recently, India outlined the framework for carbon credit trading and addressed the question concerning the specific provisions for market regulation. Amendment of the Energy Conservation Act, of 2002 by way of the introduction of the Energy Conservation Bill, of 2022 focused on the decarbonisation of the Indian economy and facilitation in achieving COP-26 goals (PRS India, 2022). The Bill passed through both Houses of Parliament. Prior to the proposed amendment, the cap-and-trade system was set to enhance voluntary demands of carbon credits. This brings the discussion to the first-of-its-kind policy on ‘cap-and-trade’ under the government of the State of Gujarat, India which signed an MOU with EPIC* India and J-Pal**(International Carbon Action Partnership, 2022) as they put a limit on emissions from the power sector. This Emission Trading Scheme (ETS) became the world’s first programme to work on Particulate Matter (PM) pollution and a reduction of 24% in PM pollution was recorded in the pilot run (India Clean Air Markets, 2021) of the project. India is not one of the historical contributors, and the challenges ahead for India are different. India has to foster a large population, manage hunger and food security (Saxena, 2018), domestic as well as international economic growth, fulfilling energy requirements for the industrial sector, etc., cannot be weighed against one another while implementing international policies ground level.


However, if the masses are mobilized on a micro level and a bottom-up approach is observed, the implementation of the new policy can be:

  1. Identification of target groups from different parts of the country and providing monitored vocational training.
  2. Effective implementation and generating industrial awareness about the concept of ‘carbon credit trading’ a model proposed in China’s Guangdong region (Cheng et al., 2015).
  3. Boosting the collaboration efforts between different organizations. Such as by welcoming international players NGOs, and civil societies to join hands with local governance bodies and the public and private sectors for innovative techniques towards problem-solving.
  4. Sensitisation and training of the working sector (Perinchery, 2022) and migrated labours bridging the gap between the language of ease i.e., the knowledge bank that is available in English and various local dialects.
  5. Educating and protecting small-scale business enterprises and helping them promote sustainable business models.
  6. Incentivizing businesses to enhance their energy efficiency by proposing tax exemptions an example of best practice from Malaysia (Oh and Chua, 2010).

The amendment not only impacts the outlook of a diverse population but it’ll act as a catalyst in climate change mitigation. It is important to recognise that in its report the United Nations Environment Programme (UNEP) stated that the per capita GHG emission levels in India(The Wire, 2022) (2.4tCO2e) are much lower compared to the world average of 6.3tCo2e. Its futuristic approach of replacing obsolete technology with a newer, economical, cleaner one. Since these actions require political deliberation and will, it becomes crucial to formulate new laws and amend the existing policies at the national level. Secondly, the creation of the Carbon Market would further help to stimulate and monitor sustainable development via the transfer of technology between nations.


  • Basu, J. 2022. COP27: Report sees slight rise in 2022 global emissions; highest in India. [Accessed 4 January 2023]. Available from:
  • BBC 2022. Climate change: What emission cuts has India promised? – BBC News. [Accessed 4 January 2023]. Available from:
  • Cheng, B., Dai, H., Wang, P., Zhao, D. and Masui, T. 2015. Impacts of carbon trading scheme on air pollutant emissions in Guangdong Province of China. Energy for Sustainable Development. 27, pp.174–185.
  • Climate Action Tracker 2022. India | Climate Action Tracker. [Accessed 4 January 2023]. Available from:
  • Guilanpour, K. and Hucke, C.C. 2022. COP27: The Mitigation Work Programme & The Ministerial Roundtable – Center for Climate and Energy SolutionsCenter for Climate and Energy Solutions. Center for Climate and Energy Solutions. [Online]. [Accessed 4 January 2023]. Available from:
  • India Clean Air Markets 2021. Explained: How Surat’s Emissions Trading Scheme Works to Reduce Air Pollution – Emissions Trading System in India. [Accessed 4 January 2023]. Available from:
  • International Carbon Action Partnership 2022. India’s state of Gujarat signs MoU to establish a cap-and-trade market | International Carbon Action Partnership. [Accessed 4 January 2023]. Available from:
  • Oh, T.H. and Chua, S.C. 2010. Energy efficiency and carbon trading potential in Malaysia. Renewable and Sustainable Energy Reviews. 14(7), pp.2095–2103.
  • Perinchery, A. 2022. Explained: What the Newly Passed Energy Conservation (Amendment) Bill Is All About. The Wire. [Online]. [Accessed 4 January 2023]. Available from:
  • PIB 2022. Press Release. PIB. [Online]. [Accessed 4 January 2023]. Available from:
  • PRS India 2022. The Energy Conservation (Amendment) Bill, 2022. [Accessed 4 January 2023]. Available from:
  • Saxena, N.C. 2018. Hunger, Under-Nutrition and Food Security in India. CPRC-IIPA.
  • The Wire 2022. COP27: India, Other Developing Countries Block Attempt to Club Them With Historical Polluters. The Wire . [Online]. [Accessed 4 January 2023]. Available from:
  • United Nations 2022. Goal 13 | Department of Economic and Social Affairs. [Accessed 4 January 2023]. Available from:
  • United Nations Climate Change 2022. Emissions Trading | UNFCCC. [Accessed 4 January 2023]. Available from:
  • United Nations Environment Programme n.d. The Greenhouse Gas Abatement Cost Model (GACMO) – UNEP-CCC. UNEP. [Online]. [Accessed 4 January 2023]. Available from:
  • United Nations Framework Convention on Climate Change 2022. Emissions Trading | UNFCCC. [Accessed 4 January 2023]. Available from:
  • United Nations Framework Convention on Climate Change n.d. What is the Kyoto Protocol? | UNFCCC. UNFCC. [Online]. [Accessed 4 January 2023]. Available from:
Author Yashprada Joglekar