The development of India’s carbon market has faced significant challenges, chief among them the creation of demand and the establishment of structured frameworks. According to a report by the World Bank, India’s carbon market, while promising, has struggled with low carbon credit prices and limited participation, primarily due to regulatory uncertainties and a lack of awareness among potential market participants.
While India’s energy consumption per capita is only one-third of the global average, if we are to meet our goal of achieving net-zero by 2070, it calls for phasing down of fossil-based energy sources.
India’s renewable energy sector is poised for continued expansion and innovation, with ambitious targets for renewable energy capacity addition. Source: solarquarter.com
Recognizing these challenges, the Indian government has taken bold decisions in the last few years. In 2023, India introduced the Carbon Credit Trading Scheme (CCTS), encompassing both compliance and voluntary sectors. The scheme is designed to mobilize investments towards low-carbon pathways by creating a competitive market that provides incentives for adopting sustainable projects generating carbon credits.
It aims to develop methodologies for estimating carbon emissions reductions and removals by assigning a value to reducing greenhouse gas emissions, allowing the trading of carbon credits within India’s carbon market framework. It will focus on hard-to-abate sectors like steel, iron ore, refineries, petrochemicals, and aluminium, with compliance set to launch in 2026.
In October 2023, the Ministry of Environment, Forest and Climate Change announced the Green Credit Program (GCP), which is a market-based mechanism, enabling individuals, communities, private sectors, and companies to earn credits for voluntary environmental actions and trade them for financial benefits on a domestic market platform.
The program emphasizes activities like water conservation and afforestation, envisioning the issuance of green credits for plantations on waste and degraded lands, as well as river catchments.
The introduction of these schemes marks a significant step towards aligning India’s economic development with environmental sustainability, aiming to strengthen India’s position in the global carbon market.
Understanding Credits: Carbon vs. Green Credits
Differentiating between carbon credits and green credits is crucial for investors and entrepreneurs, as they both serve different purposes within the environmental sustainability framework.
Carbon credits are primarily focused on offsetting greenhouse gas emissions, equivalent to reducing one ton of carbon dioxide. They are a key part of carbon trading schemes that aim to reduce emissions through financial incentives. They are integral to global carbon markets, and enjoy international recognition by the likes of the UNFCCC and the Paris Agreement.
On the other hand, green credits, which reward a broader spectrum of environmental activities, currently have more localized recognition, such as through India’s initiatives. They are awarded for various pro-environmental actions such as tree plantation, water management, and sustainable agriculture. These credits can be traded on a domestic market platform and are designed to incentivize a wide range of environmentally friendly activities beyond just carbon reduction.
The International Carbon Action Partnership (ICAP), which facilitates the linking of compatible emissions trading systems of countries, sub-national jurisdictions, and supranational institutions through mandatory cap and trade systems, reports that the global market for carbon credits reached $261 billion in 2022, with a significant portion of the growth driven by emerging markets like India.
As of June 2023, India had 860 registered projects and a total of 1,451 projects under consideration, making it a major player in terms of the volume of carbon credits issued. Approximately 298 million credits have been issued to Indian entities, representing almost one-fifth of the total credits issued globally.
Startups Leading The Carbon Emission Race
Worldwide, as a sector, real estate is responsible for approximately 39% of global carbon emissions, 30% of energy consumption and 20% of total water consumption. The imperative to embrace sustainability is, therefore, of utmost significance.
Carbon analytics and accounting startups are part of a growing sector focused on building sustainability, energy efficiency, and ESG compliance in real estate operations.
They offer tools and analytics that can aid property developers, managers, and owners in reducing their carbon footprint and improving environmental performance, aligning with broader goals of enhancing efficiency and sustainability in the property industry.
Here are some leading startups in this space:
Varaha: A leading startup specializing in carbon accounting and ESG reporting. They offer innovative tools and services to help businesses measure, manage, and reduce their carbon footprint effectively.
Altcarbon: It is a prominent player in the carbon analytics sector, focusing on delivering cutting-edge technologies and services for carbon accounting and sustainability reporting. Their solutions empower organizations to track and optimize their environmental performance.
Updapt: It is a dynamic startup that excels in carbon analytics, offering advanced software and consultancy services to streamline carbon accounting processes and enhance ESG performance. They enable companies to make informed decisions to drive sustainability and reduce their carbon impact.
Each of these has a unique approach and specialization within the broader realm of carbon accounting and analytics. While Varaha is dedicated to generating carbon credits through agricultural emission projects and nature-based solutions, Altcarbon focuses on developing technologies and services for carbon accounting and sustainability reporting. Updapt, on the other hand, provides software and consultancy services for carbon accounting processes.
As India responds to the leading global awareness of climate change, the intersection of technology and sustainability represented by these startups offers hope and actionable pathways towards a more sustainable and environmentally conscious world. We have a long way to go, but India’s lucrative carbon market is already worth an impressive $1.2 billion. It will only grow as the crisis of climate change becomes more urgent and companies strive to attain net-zero emission goals.
