Indian Voluntary Carbon Market Soars

On August 4, India’s power minister Raj Kumar Singh announced at an event organised by his ministry that the country was open to the export of carbon credits, though he did qualify this by saying that trading would be done with countries that buy green hydrogen from India. The announcement came after months of toing and froing on the issue. It started in August last year, when during a debate in the Parliament on the Amendments to the Energy Conservation Act, which proposed the creation of a domestic carbon market, Singh said that India would not allow any export of carbon credits until the nation meets its climate goals. (Under the Paris Agreement of 2015, India has pledged to reduce the emissions intensity of its GDP by 45 per cent by 2030, from the 2005 level.) “These credits will have to be generated and bought by domestic industries,” Singh had said.

The minister’s comment did not go down well with the private players engaged in the carbon market. Within days, the share price of one of India’s top carbon credit developers and suppliers EKI Energy Services Ltd plunged. On August 18, 2022, Manish Dabkara, chairperson and managing director of EKI Energy, told Mongabay, a news portal, that Singh’s comment was not applicable to the voluntary carbon market.

The government’s position appeared to have changed to an extent by October that year, when Singh on the sidelines of the Fifth Assembly of the International Solar Alliance told the media that Indian carbon credits would be allowed to be sold in both domestic and overseas markets. “Those carbon credits that go to make up our own NDCs [nationally determined contributions under the Paris Agreement] we would want to keep for ourselves. But anything beyond that can be sold anywhere in the world,” he said. On June 28, 2023, the government issued a notification, detailing the framework of Indian carbon market under the Carbon Credit Trading Scheme, 2023, but does not include voluntary markets (see ‘Saving the carbon bubble’,).

All set to grow
Carbon credit is already big buck business and India has a substantial share of the market for voluntary carbon credits. An investigation by Down To Earth and the Centre for Science and Environment (DTE-CSE) shows that till June 2023, the country had 860 registered and a total of 1,451 projects under various stages of consideration at the world’s two leading carbon crediting programmes, Verra and Gold Standard, which certify projects to receive credits. India is a big player even in terms of the volume of carbon credits. Verra and Gold Standard—Verra, set up by a group of environmental and business leaders, is headquartered in Washington, DC; Gold Standard was founded by a group of non-profits and is based in Geneva—control roughly 90 per cent of the independent (non-governmental) carbon credits issued across the world. Almost one-fifth—or 298 million—of these credits have been issued to Indian entities. Each carbon credit represents 1 tonne of carbon dioxide or the equivalent greenhouse gas (CO2e) avoided, reduced or removed (market terminology for sequestration). This would mean the carbon credits issued to Indian entities are worth almost 10 per cent of the country’s annual greenhouse gas emissions in 2020.

f this, some 163 million credits have been “retired” by May 2023. Meaning, the companies that had got the carbon credits issued have sold these to other companies and the buyers have claimed emission offsets against the credits. For once, India has beaten China, which has retired 100 million credits till May 2023. DTE-CSE investigation shows that these carbon credits sold by Indian entities have been bought by companies like Vitol Asia PTE Ltd, a Singapore-based business that trades in oil and gas among other commodities; Michelin Group, a French multinational tyre manufacturer; and Shell, a British multinational oil and gas company.

The market is opaque, to say the least. What is not at all clear is the price at which the carbon credits have been sold. The transactions are treated as “commercial” and hence confidential—convenient for a market which works purportedly for the planetary good.

According to Ecosystem Marketplace, a US-based research organisation, the total recorded transactions globally in 2021 were $1.98 billion (R16,342 crore), against which 493 million credits were either issued or retired. This would mean the average price of a carbon credit was $4 (R330) in 2021. In India, DTE-CSE investigation shows that the price would range from $2 to $10 (R165-R824) per credit that have been retired till now.

Assuming that the global average price is $4 per credit, India’s carbon market is valued at $1.2 billion (R9,894 crore)—or possibly more given the current market rates. If one assesses the value of India’s retired credits, the sellers must have realised as much as $652 million (R5,376 crore). So, India already has a lucrative market, which developers believe will only grow as the crisis of climate change becomes more urgent and companies strive to attain net-zero emission goals.