Delhi to Earn Revenue from ‘Carbon Credits’

Syllabus: GS3/Environment

Context

• Delhi government has announced that it has approved a framework for carbon credit monetisation. 
  • The government has not released much details in the public domain regarding the framework or how and when it will be implemented.

About

• Delhi government activities such as operating electric buses, plantation drives, promoting solar energy and waste management, will be used to generate carbon credits under the new policy. 
  • The reduction in emissions through these initiatives will be scientifically measured, registered as carbon credits, and sold in national and international carbon markets to generate revenue.
• A specialised agency will be selected to handle documentation and registration as per international norms.
  • The model is based on revenue-sharing, with no upfront cost to the government. 
  • All proceeds will be deposited in the Consolidated Fund of the State.
• Delhi is one of the pioneers among states to approve such a policy.
  • Maharashtra has approved one such policy four-five months ago. 
  • This mechanism creates a direct financial incentive for the government to engage in activities which reduce carbon emissions.

Carbon Markets

• Carbon markets are trading systems in which carbon credits are sold and bought. 
• Companies or individuals can use carbon markets to compensate for their greenhouse gas emissions by purchasing carbon credits from entities that remove or reduce greenhouse gas emissions.
• One tradable carbon credit equals one tonne of carbon dioxide or the equivalent amount of a different greenhouse gas reduced, sequestered, or avoided. 
• When a credit is used to reduce, sequester, or avoid emissions, it becomes an offset and is no longer tradable.
• There are broadly two types of carbon markets: compliance and voluntary. 
  • Compliance markets are created as a result of any national, regional, and/or international policy or regulatory requirement.
  • Voluntary carbon markets – national and international – refer to the issuance, buying, and selling of carbon credits voluntarily.

India’s Position in the Global Carbon Pricing Landscape

• India is moving towards a rate-based Emissions Trading System (ETS) with the adoption of the Carbon Credit Trading Scheme (CCTS) in 2024.
  • Rate-based ETS refers to a system where total emissions are not capped, but individual entities are allocated a performance benchmark that serves as a limit on their net emissions. 
• The national ETS will initially cover nine energy-intensive industrial sectors.
• The scheme focuses on emissions intensity, not absolute emissions caps.
• Credit Certificates will be issued to facilities that outperform benchmark emissions intensity levels.

Government Steps to Strengthen Carbon Market Readiness

• As highlighted during the COP 27, India balances its developmental needs with lower carbon emissions through Common but Differentiated Responsibilities and Respective Capabilities (CBDR-RC) principles. 
• India’s efforts include:
  • Mission LiFE and the Green Credit Program to promote a sustainable lifestyle.
  • Creation of the National Steering Committee for the Indian Carbon Market (NSCICM) and the Bureau of Energy Efficiency (BEE) under the Ministry of Power.
  • Incentives for private sector participation.

Conclusion

• As global markets evolve and instruments like CBAM create external pressures, India is aligning its policies to maintain competitiveness while achieving climate goals. 
• By focusing on emissions intensity rather than absolute caps, India’s rate-based ETS offers a pragmatic and flexible path forward, particularly for an economy balancing development with decarbonization. 

Source: IE