TAG: GS-2: IR & GS-3: ECOLOGY AND ENVIRONMENT
CONTEXT: At the COP29 climate talks in Baku, Azerbaijan November 2024, a landmark decision was made allowing wealthy countries to purchase carbon credits (offsets) from developing nations.
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- This decision is part of the U.N.’s Article 6 framework, which has been under negotiation for years, and was approved after extended talks, with diplomats applauding the outcome.
EXPLANATION:
Carbon Credit Mechanism:
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- Carbon credits represent a quantifiable reduction in greenhouse gas emissions, which can then be bought, sold, or traded.
- For a carbon market to function effectively and genuinely contribute to emissions reductions, the credibility of its carbon credits is paramount.
- However, if these credits lack integrity, meaning they do not accurately reflect real, additional emissions reductions, the carbon market risks becoming a tool for greenwashing.
India’s Initiatives:
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- India updated its NDCs in 2023 to underline, among other things, the establishment of a domestic carbon market as a part of its climate strategy.
- The Energy Conservation (Amendment) Act of 2022 provided a statutory mandate for such a Carbon Credit Trading Scheme (CCTS).
- Through this, India aims to align its climate commitments under the Paris Agreement with broader economic goals.
- Yet, for the market to truly support these objectives, it must be meticulously designed to ensure credibility, efficiency, and fairness.
- From global experiences, India must incorporate pivotal lessons in its carbon market framework for long-term success.
Article 6 of the Paris Agreement:
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- Article 6 allows for cross-border carbon trading, where countries can trade emissions reductions.
- It has garnered support from both wealthy nations (for meeting emissions targets) and developing countries (for financial support through carbon credits).
Potential Concerns:
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- Critics worry that poorly regulated carbon trading systems could lead to “greenwashing,” where countries might falsely claim emissions reductions without real action.
- Concerns exist that countries could manipulate emissions targets to benefit from carbon credits, undermining global efforts to reduce greenhouse gas emissions.
Current Status of Carbon Trades:
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- More than 90 deals and over 140 pilot projects have been signed, but only one trade has occurred between countries: Switzerland buying credits linked to electric buses in Bangkok.
- Switzerland, Vanuatu, Ghana, Singapore, Japan, and Norway are also involved in carbon credit deals.
The Role of U.N.-Administered Markets:
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- In addition to the country-to-country deals, the U.N. has set up a separate, regulated carbon credit marketplace.
- This will allow both states and companies to participate, providing a more structured and transparent approach to carbon credit trading.
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