India, the third-largest emitter of greenhouse gases (GHGs), is strengthening its response to climate change through carbon markets and carbon sink enhancement projects. These mechanisms align with India’s target of achieving net-zero emissions by 2070 under the Paris Agreement, while balancing growth with sustainability.
Why Are Carbon Markets & Carbon Sinks Important?
Reduce carbon emissions by putting a price on pollution
Encourage industries to adopt green technologies
Enhance natural carbon absorption through forests and oceans
Attract green finance and investments
Carbon Markets: India’s Approach
What is a Carbon Market?
A system where businesses buy and sell carbon credits to compensate for emissions.
Two types:
Cap-and-Trade Market (Compliance Market) – Govt. sets emission cap; credits traded if limits are under/overused (e.g., EU ETS, California).
Represents 1 metric tonne of CO₂ reduced or removed.
Tradable instrument – low emitters sell, high emitters buy.
How It Works
Govt. sets emission limit.
Companies monitor and report emissions.
Exceeding emitters must buy credits; efficient ones sell extra credits.
Credits traded on carbon exchange platforms.
India’s Carbon Market Developments (2024–25)
Indian Carbon Market (ICM) launched in 2023; first cycle in 2024 with sectors like power, steel, cement, oil & gas.
Carbon Credit Pricing Framework introduced in 2024.
First Carbon Exchange Platform established.
Expansion to medium industries and linkage to global carbon trading platforms expected in 2025.
Future Directions
Mandatory participation for all high-emission industries by 2025.
Extension to transport and aviation sectors.
Integration with renewable energy projects.
Carbon Sinks: India’s Initiatives
What is a Carbon Sink?
A natural system that absorbs more CO₂ than it emits (forests, mangroves, soil, wetlands, oceans).
Expansion Projects (2024–25)
Project
Location
Objective
Mangrove Mitra Initiative
West Bengal, Odisha, Gujarat
Expand mangroves for CO₂ absorption
Green Cities Project
Delhi, Mumbai, Bengaluru
Urban forestry, rooftop gardens
Aravalli Reforestation
Rajasthan, Haryana
Restore degraded forests
Goal: 2.5–3 billion tonnes of CO₂ sequestration by 2030.
Key programs: Green India Mission, National Afforestation Programme, mandatory tree plantations in industrial zones.
Carbon Capture & Storage (CCS) in India
What is CCS?
Captures CO₂ emissions from industries and stores underground in geological formations.
Process
Capture at industry
Compress & transport
Store in reservoirs/deep seas
Indian CCS Developments (2024–25)
NTPC & ONGC – exploring CO₂ storage in deep-sea reservoirs.
IIT Bombay – converting captured CO₂ into biofuels.
BHEL – launched India’s first CCS pilot plant (2025).
International Collaborations
EU – Carbon trading links under discussion.
UN REDD+ – Funding for afforestation projects.
UAE & Saudi Arabia – Joint R&D in CCS and green hydrogen.
Challenges
Challenge
Impact
Solution
Carbon pricing undervalued
Weakens market participation
Stronger pricing frameworks
Deforestation & land degradation
Reduces carbon sink capacity
Strict conservation & afforestation
High CCS costs & limited infra
Slows adoption
Govt. incentives & private funding
Comparison with Global Carbon Markets
Feature
India (ICM)
EU ETS
China
US (California)
Launch Year
2023
2005
2021
2013
Market Type
Compliance + Voluntary
Compliance
Compliance
Compliance
Coverage
Power, Steel, Cement
Power, Aviation, Industry
Power, Manufacturing
Power, Transport
Carbon Price (2024)
₹700–₹1,500/ton
€90/ton
¥50/ton
$28/ton
Mandatory Trading
No (yet)
Yes
Yes
Yes
Conclusion
India’s carbon market and carbon sink initiatives are crucial pillars of its net-zero by 2070 strategy. With the Indian Carbon Market expanding, afforestation programs growing, and CCS research advancing, India is positioning itself as a potential global carbon credit supplier. Strengthening carbon pricing, green finance, and international cooperation will be vital for India to balance development with climate leadership.
