Carbon credits are certificates generated by projects that either avoid or remove greenhouse gas emissions. Each credit symbolises the reduction of one metric ton of carbon dioxide or its equivalent (CO2e) in the atmosphere. These projects rely on the sale of carbon credits, undergoing independent audits to confirm the amount of carbon emissions avoided or reduced.
How Carbon Credits Work
Numerous organisations set ambitious climate targets, aiming to reduce emissions associated with their activities. However, some emissions are unavoidable. To offset these, organisations invest in external decarbonization projects, and this is where carbon credits play a vital role.
Carbon credits facilitate the flow of crucial finance to decarbonization projects globally, aiding in achieving global climate objectives and supporting communities disproportionately affected by climate change.
How Companies Can Offset Carbon Emissions
Listed below are few options by which companies can offset carbon emissions-
Investing in Renewable Energy
Carbon Capture and Utilisation
Soil Carbon Sequestration
Reforestation and Forest Regrowth
Adoption of Lower-Carbon Fuels
Carbon Credits in India’s Context
Carbon Credits in India’s context
The Government of India has introduced an amendment to the Energy Conservation Act, 2001, paving the way for the establishment of a carbon credit market in the country. The amendment aims to incentivize emission reduction actions and provides a legal framework for a carbon market.
Under this framework, entities can register as “Registered Entities” for carbon credit trading. The certificates will be issued by the central government or authorised agencies. Additionally, any person or entity can purchase carbon credit certificates voluntarily.
The Indian Carbon Market (ICM) is being developed to decarbonize the Indian economy by pricing greenhouse gas emissions through carbon credit trading. The Bureau of Energy Efficiency, Ministry of Power, and Ministry of Environment, Forest & Climate Change are collaborating to design the Carbon Credit Trading Scheme. This scheme will cover various energy sectors and establish emissions intensity benchmarks and targets aligned with India’s climate goals.
The ICM will develop methodologies for estimating carbon emissions reductions, validation, registration, verification, and issuance processes. It will also establish Monitoring, Reporting, Verification (MRV) guidelines and a comprehensive institutional and governance structure. Capacity building initiatives will ensure entities are equipped with necessary skills.
The ICM will mobilise mitigation opportunities by creating demand for emission credits. A well-designed carbon market mechanism will reduce GHG emissions at the least cost and drive the adoption of clean technologies in India’s growing economy.
(Source: PIB and Carbon Credits)
