Get carbon markets right

Globally, existing trade suffers from varying, laxly-defined standards. India must ensure it doesn’t replicate this

Get carbon markets right
Indeed, greenwashing through carbon markets should be a priority concern for a country like India that sees itself as a climate action champion. (Representative image)

India has outlined its ambitions on developing a domestic carbon market in its new Energy (Conservation) Bill. Carbon trade—in which emission reduction/removal by a party can be converted into credits that can be purchased by an emissions underperformer—is already happening in some form in India. The Perform, Achieve, and Trade (PAT) scheme, involving energy savings certificates to industries that can be traded is one such example. But, a developed, comprehensive carbon market can also be a boon for agriculture, by mainstreaming sustainable agricultural practices and supplementing farm income. Agriculture in India, particularly paddy cultivation done the traditional way, has a heavy greenhouse gas (GHG) footprint. A 2018 study based on rice cultivation by researchers at the US-based Environmental Defense Fund found that the emissions from rice cultivation were vastly underestimated.

Paddy cultivation practices contribute more than 10% of methane emissions globally—methane has a higher warming potential than carbon dioxide though it lives for a much shorter time in the atmosphere—and a whopping third of such emissions in South Asia. In India, a large rice-producer, agricultural methane emissions (including those from livestock) form 75% of the total methane emissions. Paddy cultivation is also responsible for nitrous oxide and carbon dioxide emissions; the former lasts in the atmosphere for a long time and has a larger warming potential than even methane. To that end, a collaboration between the Indian Agricultural Research Institute, The International Wheat and Maize Improvement Centre (CIMMYT), and Mahyco and Indigo Ag—GrowIndigo India—that was announced in March this year is a significant step forward. It will establish a carbon market for farmers who adopt emission reduction practices such as zero stubble-burning, direct seeded rice that brings down methane emissions, no tillage, etc. This will be a major boost for agricultural incomes if it takes off.

Also Read: India could do more to elevate its climate leadership…

But, crucial to this will be the development of robust and well-defined rules, proper tracking of emission reduction, and preventing greenwashing. The potential for India is undeniable, but greenwashing concerns about carbon markets abound. For instance, some experts believe the recently-concluded COP27 featured calls to dilute the COP26 prohibition on double-counting of a certain class of carbon offsets, though others argue designating these as “contributions” instead of credits is an adequate safeguard if the “right provisions are incorporated”. Indeed, greenwashing through carbon markets should be a priority concern for a country like India that sees itself as a climate action champion.

An investigative report published by Bloomberg in 2020 found that Nature Conservancy, one of the largest environment groups in the world, had dealt in “meaningless carbon offsets” with large multinationals among its clientele. The problem stems from the fact that there is no robust international standard for carbon accounting, and carbon markets pick from a bouquet of standard-setting by private parties, such as Verra, Gold Standard, etc. Section 14 of India’s Energy (Conservation) Bill—which will become law if passed by the Rajya Sabha in December—vests the power with the Union government or any approved agency to set the standards and issue certificates. Along with the Bureau of Energy Efficiency’s draft blueprint for the phased introduction of a national Cap-and-Trade system, this should help build credibility with uniformity of standards, but only if the government doesn’t end up replicating laxly-defined standards that have allowed carbon markets to keep failing climate action.

Get live Share Market updates and latest India News and business news on Financial Express. Download Financial Express App for latest business news.

First published on: 28-11-2022 at 05:15:00 am