Carbon credit trading is one of the most important instruments for India to successfully combat climate change. This system enables organizations to trade in Carbon credits whereby one credit represents one metric tonne of CO₂ equivalent or other greenhouse gases emissions. Below is a summarized look at carbon credit trading in India.
What Are Carbon Credits?
Carbon credits are simply vouchers which enable the holder to emit a certain quantity of CO₂. If a project reduces or captures one ton of CO₂, then project owners are granted one carbon credit. Such credits can be bartered and the emergence of a market of credits encourages a reduction in emissions.
How It Works
Regulatory Framework: This includes policies such as National Action Plan on Climate Change (NAPCC) along with Perform Achieve Trade (PAT) which was designed to provide the rules for generation and trading of carbon credits and verification.
Trading Platforms: Credits are also bought and sold in the national and the international market, where buyers and sellers can easily identify the credits market.
Verification: There is recognition that many projects are fakes so they have to be approved by companies such as the Bureau of Energy Efficiency (BEE) and the National Clean Development Mechanism Authority (NCDMA).
Benefits
Economic Gains: Some organizations can be paid for carbon credits and this will finance other activities to combat the effects of global warming.
Emission Reduction: Encourages commodity or product life cycle modifications to encourage business owners to engage in cleaner technologies.
Global Integration: Talks to the Indian industry for climate change and global programmed and consolidates green investment.
Challenges
Market Fluctuations: Costs of carbon credits may also fluctuate thus impacting the profitability of the projects.
Verification Issues: The problem persists as to how one can be certain that these emission reductions are accurate.
Policy Alignment: There exists the necessity to coordinate the market’s position and its activities with global climate agreements.
Conclusion
Carbon credit trading is an effective tool in India’s climate policy, it has many advantages that are both economic and environmental. It encourages increase in low-carbon activities and therefore promotes the shift towards a low carbon economy even as it is faced with some problems such as the volatility of the markets for the credits and other social problems associated with verification.
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