top of page
  • General Carbon

Are Global Carbon Markets Reviving?

Don’t expect a straight answer. The best answer is -there is an increased intensity of noise and buzz around carbon credits generated under the Clean Development Mechanism. Many trade inquiries for CERs have origin in the expected gap in CER quota in the EU Emission Trading Scheme. Such trade inquiries may be transient but more significant signals for hope in the revival of global markets are – (i) actions by many countries around Article 6 of the Paris Climate Agreement, (ii) US Presidential elections’ outcome, and (iii) independent and voluntary private-sector commitments to meet the ambitions of Paris Climate Agreement. These amongst others are reasons for the positive buzz around Global Carbon Markets.

Coordinated Response on Climate Change Matters

Nearer home, the Government of India on November 27, 2020, through a gazette notification, has constituted the Apex Committee for the Implementation of the Paris Agreement (AIPA). The Constitution of this committee would not have come at a more appropriate time or could not have been timed better. Earlier this month, the Taskforce on Scaling Voluntary Carbon Markets (TSVCM) has released its first consultative document[1]. TSVCM is a private sector-led initiative working to scale an effective and efficient voluntary carbon market to help meet the goals of the Paris Agreement.

AIPA and Carbon Markets

AIPA of Government of India has been constituted with the purpose of “ensuring a coordinated response on climate change matters that protects the country’s interests and ensures that India is on track towards meeting its climate change obligations under the Paris Agreement including it’s submitted Nationally Determined Contributions (NDCs)”[2]. Most importantly, the AIPA will also act as a national authority for the regulation of carbon markets in India under Article 6.2, Article 6.4, and Article 6.8 of the Paris Agreement. Constitution of AIPA and mention of carbon markets in its mandate, a signal for internal carbon markets in India to facilitate achievement of NDCs? -not clear. But AIPA’s work will be crucial for India and its position vis a vis rollover of CERs into Paris Climate Agreement, in the previous COP 25 at Madrid, Spain.

Recall the issues raised by India and other developing countries in Madrid. India and many other countries vehemently argued that not valuing the CERs post-2020 under the UN-mandated sustainable development mechanism will send a wrong signal to private players who invested in them. The rollover credits amount to 4.65 Gt CO2 carbon offsets, largely allocated to China, India, and Brazil. Such rollover may pose threat to the challenge of achieving climate ambition. However, not rolling over would mean breaching the trust of many public and private players that have invested into the GHG emission reduction projects which “would not have happened otherwise” or “were not financially viable”. AIPA would play an important role in the negotiations and maintain a fine balance between shoring up trust in climate mechanisms (realize the value for carbon offsets that were generated under the Kyoto Mechanisms) and integrity of Article 6 of the Paris Climate Agreement.

Private Sector Voluntary Initiatives in Carbon Markets

AIPA, in playing its role as Carbon Market Regulator and Promoter, may keep a close watch on Private Sector Voluntary Initiatives in Carbon Markets and dovetail that smartly into Paris Climate Accord and market mechanisms therein. The private sector-led initiative, the Taskforce on Scaling Voluntary Carbon Markets, is working to scale an effective, efficient, and functioning voluntary carbon market to help meet the goals of the Paris Climate Agreement. The Taskforce was initiated by Mark Carney, UN Special Envoy for Climate Action and Finance Advisor to UK Prime Minister Boris Johnson for COP26 is chaired by Bill Winters, Group Chief Executive, Standard Chartered.

The Taskforce was convened in September to quickly draft a set of practical recommendations to develop a well-functioning voluntary carbon market. A large, transparent, verifiable, and robust voluntary carbon market will be critical to reaching net-zero and net negative goals.

The Consultation Document outlines 17 recommendations, spanning six topics, to scale voluntary carbon markets; these topics include a proposed set of principles (core carbon principles) that would help establish standardised benchmark contracts that would be listed on exchanges and utilise existing infrastructure. The Taskforce will seek consensus on the legitimacy of offsetting, on steps to develop certainty regarding market integrity, and on ways to establish best practices for buyers and investors.

Kyoto Carryover Could Cancel Out Key NDC Ambition?

Would AIPA consider and integrate private sector initiatives into its plans of using global market mechanisms for achieving NDCs? Or it would essentially limit itself to advancing arguments for simple rollover of generated CERs and adversely affect the ambition of the Paris Climate Agreement? Above all, AIPA could surprise everyone by leveraging rollover or retiring of CERs for generating climate finance to fund action to achieve climate ambition by developing countries.


[1] You can provide your inputs to the consultative document till December 10

[2] The three quantitative goals in the Indian NDCs are:

  1. A 33-35 per cent reduction in the gross domestic product emissions intensity by 2030 from 2005 levels,

  2. A 40 per cent share of non-fossil fuel-based electricity by 2030, and

  3. Creating a carbon sink of 2.5-3 billion tonnes of carbon dioxide through afforestation programmes

26 views0 comments

Recent Posts

See All

DJSI/CSA 2020 Update

On Wednesday 1 April, the annual Corporate Sustainability Assessment begins. The S&P questionnaire will be open for filling in. As you know, this is the basis for selecting the best- performing compan


bottom of page