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Centre Forms National Authority for Carbon Markets

Why in the News?

The Ministry of Environment, Forest and Climate Change has finalized the creation of a National Designated Authority (NDA), a 21-member body mandated under Article 6 of the Paris Agreement (2015), to oversee carbon markets, emission reduction projects, and NDC implementation. This move signifies India’s commitment to participating in the global carbon trade and developing its domestic carbon market.

India’s Nationally Determined Contributions (NDCs):

● NDCs are country-level commitments under the Paris Agreement to combat climate change and reduce greenhouse gas (GHG) emissions intensity.

● India’s targets for 2030 include:

○ Reduce emissions intensity of GDP compared to 2005 levels.

○ Achieve 50% of installed electricity capacity from non-fossil fuel sources.

○ Create an additional carbon sink of 2.5–3 billion tonnes of CO₂ through afforestation.

● NDA will ensure projects align with both climate commitments and domestic development priorities, while facilitating carbon credit trading and market mechanisms.

Significance of NDA & Global Context

● Article 6 of Paris Agreement: Defines framework for carbon markets and international emission trading.

○ Resolved at COP29, Baku (Azerbaijan), 2024 after years of negotiations.

● National Significance:

○ Enables India to participate in global carbon markets and establish a robust Indian carbon market.

○ Boosts investments in renewable energy and emission reduction technologies.

○ Reinforces India’s pursuit of climate leadership while ensuring low-carbon economic growth.

● Strategic impact: Balances climate obligations with national energy security and development needs through carbon pricing mechanisms and market-based approaches.

About the National Designated Authority (NDA):

● Mandatory body under the 2015 Paris Agreement, Article 6.

● Composition:

○ 21-member committee.

○ Headed by the Secretary, Environment Ministry.

○ Includes officials from Ministries of External Affairs, Steel, Renewable Energy, and NITI Aayog.

● Functions:

○ Receive and evaluate projects related to emission reduction and carbon sequestration.

○ Authorize use of Emission Reduction Units (ERUs) toward achieving India’s NDCs.

○ Recommend and update eligible activities for carbon trading in line with national sustainable development goals.

○ Oversee the development of robust MRV systems and ensure environmental integrity in carbon market activities.

The establishment of the NDA marks a significant step in India’s engagement with international carbon markets and the clean development mechanism (CDM). It will facilitate the generation and trading of certified emission reductions (CERs) and other carbon credits, enhancing market liquidity and supporting decarbonization efforts.

The NDA will play a crucial role in implementing carbon pricing and developing both compliance and voluntary carbon markets in India. This includes overseeing schemes like the Perform, Achieve and Trade (PAT) scheme, which generates energy saving certificates (ESCerts), and potentially expanding into new areas of carbon credit generation.

As India works towards its NDC targets, the NDA will ensure that carbon market governance aligns with national priorities. This includes managing the issuance of International Transferred Mitigation Outcomes (ITMOs) and implementing corresponding adjustments to avoid double counting of emission reductions.

By establishing a clear framework for carbon market participation, India is positioning itself as a key player in global efforts to combat climate change through market-based mechanisms. The NDA will be instrumental in balancing economic growth with environmental sustainability, leveraging carbon trade to drive innovation and investment in low-carbon technologies.