India is on the cusp of a significant development in its commitment to combating climate change. Sources reveal that the Union government is planning to establish a new agency, mirroring the structure and success of the National Agriculture Cooperative Marketing Federation of India (NAFED), to regulate the burgeoning carbon market and spearhead various green initiatives. This ambitious undertaking underscores India’s proactive approach to tackling climate change and aligning with global efforts.
The proposed agency will play a pivotal role in the nation’s carbon trading endeavors, further propelled by the landmark decision at COP29 to establish rules for a global carbon market. This decision allows countries to engage in carbon credit trading, opening up new avenues for economic development while promoting environmental sustainability. The groundwork for this initiative has already been laid by the Parliament’s passage of the Energy Conservation (Amendment) Bill, 2022, which paved the way for the creation of a domestic carbon market within India.
The new agency’s responsibilities will extend beyond carbon trading to encompass other vital green initiatives, including the issuance and management of green bonds. This is a strategic move to attract global green investment and accelerate the transition to a greener economy. One source commented, “The policy on carbon marketing and carbon taxing will emerge, and the ministry of power is working on it. If the policy comes into effect, there will be agencies which will completely control the carbon trading market. Green initiatives also fall under the same category.”
However, the path to a truly green economy is fraught with complexities. International definitions of ‘green’ vary widely, leading to potential challenges. As one source explained, “The definition of green is down to what is internationally acclaimed green. Europe is so stringent about green that even if you produce hydrogen from natural gas, they say it is not green. For them, green is something that does not use anything from carbon, and that could only be biomass, which is the most renewable.” This highlights the importance of a robust regulatory body to navigate these complexities and ensure that India’s green initiatives meet international standards while promoting its own economic interests.
The amended Energy Conservation Act, 2022, empowers the Indian government to create a domestic carbon market and designate agencies to issue carbon credit certificates (CCCs). Each CCC will represent a reduction or removal of one tonne of CO2 equivalent (tCO2e) from the atmosphere. The Indian Carbon Market Framework incorporates two key mechanisms: a compliance mechanism targeting emissions from energy use and industrial sectors, and an offset mechanism incentivizing voluntary GHG reduction actions from entities not covered under the compliance mechanism. This comprehensive approach aims for a holistic decarbonization of the Indian economy. The Bureau of Energy Efficiency (BEE) will play a crucial role in administering the scheme and setting targets, while the Central Electricity Regulatory Commission (CERC) will regulate carbon credit certificate trading.
India’s commitment to climate action is evident in its ratification of the Paris Agreement in 2016 and its subsequent Nationally Determined Contributions (NDCs). India has consistently increased its ambition, most recently revising its NDCs in August 2022 to commit to a 45% reduction in GHG emission intensity by 2030 from 2005 levels. The upcoming third round of NDCs, due in February, will further solidify India’s commitment to sustainable development.
The proposed agency, modeled after NAFED, aims to unlock opportunities for attracting significant green finance. One source highlighted the potential: “The agency may be a form like NAFED, but for green industrial development. There is a total bond market of $120 trillion globally. Out of that, $3 trillion are already green. Can you tap that money in India? That is the thing. As an economy, you can only do to an extent; you need money from outside. The government is trying to figure out if it can bring money in the name of green through an institution.” Currently, the green finance working committee under the finance ministry oversees the issuance of sovereign green bonds, but the establishment of this new agency would significantly enhance India’s ability to attract and manage green finance. While India’s $21 billion in green bonds represents a relatively small portion of the global market ($575 billion in 2023), this new initiative could propel India to become a major player in the global green finance arena.
The silence from the relevant ministries at the time of writing this article underscores the sensitivity of this evolving situation. As the details of this new agency emerge, its impact on India’s economic landscape and climate goals will undoubtedly be significant. The creation of a dedicated entity signals a serious commitment to sustainable growth, drawing international attention and potentially setting a precedent for other developing nations striving to balance economic development with environmental protection.
