ABSTRACT
This chapter presents a two-part analysis. The first part examines the role of existing carbon markets in influencing economy-wide emissions and providing a source of climate finance. The second part examines the potential of India’s planned carbon market.
The chapter notes that in developed economies these markets have played a role in decoupling emissions from economic activity It also establishes that there is a ‘lag-effect’: between the time that a carbon market is set-up and the time when emission reductions begin to be seen in response to that. Carbon markets have also been an important source of finance for the regions they operate in.
In 2023, the Government of India announced the development of the Indian Carbon Market (ICM), which builds on the Energy Conservation (Amendment) Bill, 2022. While the details are yet to emerge, it is likely to build off existing market-based mechanisms – Perform Achieve Trade (PAT) and the Renewable Energy Certificates (RECs). Over the last decade, the PAT and REC schemes have created institutional capacity and processes for recording, reporting and verification: all of which are necessary in a carbon market. However, carbon prices are low with regards to those that can influence business-action.
