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Carbon Credits and Offsets: Global Mechanisms and India’s Reality

1. What are Carbon Credits?

  • Definition: A certificate representing 1 ton of CO₂ avoided or removed from the atmosphere.
  • Purpose: Allow emitters to offset their emissions by funding reduction projects elsewhere.
  • Types of Markets:
    • Compliance Market: Regulated by law (e.g., Kyoto Protocol, EU ETS)
    • Voluntary Market: Companies/individuals offset for ESG or reputational goals

2. How Do Carbon Credit Projects Work?

Key Requirements:

  1. Additionally: Project must go beyond "business as usual"
  2. Baseline: Estimate of emissions without the project
  3. Permanence: Carbon stored must not be re-released quickly
  4. Leakage: Emissions must not shift to another location
  5. MRV: Monitoring, Reporting, and Verification

Common Project Types:

  • Renewable energy
  • Reforestation/agroforestry
  • Methane reduction (biogas, cookstoves)
  • Wetland restoration

Certification:

  • By international registries (e.g., Verra, Gold Standard)
  • Sold via brokers/platforms

3. Global Carbon Market Snapshot

Region Status Credit Price (per ton) Coverage
European Union Active ~$90 37% of EU emissions
China Active ~$11.74 Allows some offsets
South Korea Active ~$6.40 Allows some offsets
India Under development (CCTS) – Domestic market in progress

Market Size:

  • 2021: $2 billion (voluntary market)
  • 2030 (projected): $50–100 billion

4. India’s Role in Carbon Markets

  • Top supplier in voluntary markets
  • ~1,700 projects registered under international mechanisms
  • Upcoming Carbon Credit Trading Scheme (CCTS) under Energy Conservation Act 2022

Common Projects in India:

  • Agroforestry (e.g., Mahogany in Bastar)
  • Improved cookstoves
  • Biogas distribution
  • Alternate wetting and drying (AWD) in rice farming
  • Wetland restoration

5. Ground Realities: Critiques and Failures

Key Issues:

  • Overstated Impact: 90% of Verra-certified forest offsets had no real climate impact (2023)
  • Greenwashing: Companies like Disney, Shell, Gucci bought questionable credits
  • Exploitation: Farmers and communities often underpaid and excluded

Case Studies from India:

A. Mahogany Project in Bastar

  • Farmers promised 50% revenue share → received only 12%
  • No understanding of carbon contracts
  • No real monitoring → used default values

B. Biogas and Cookstoves (MP)

  • Devices broken or unused
  • Credits sold without verification

C. AWD Paddy (Telangana)

  • Farmers adopted technique but received no payment

Common Flaws:

  • Lack of transparency
  • No local involvement
  • Weak MRV
  • Corporate profit over community benefit

6. India’s Upcoming Carbon Credit Trading Scheme (CCTS)

Concerns:

  • Will it be compliance-based or voluntary?
  • Who will verify projects?
  • How will small producers access the market?
  • Will it ensure equity and justice?

Need for:

  • Better accounting
  • Fair contracts
  • Local governance
  • Community participation

7. Key Takeaways

  • Carbon markets have potential but are prone to exploitation
  • Justice and equity must be central to carbon credit design
  • Local communities should benefit fairly from carbon projects
  • Strong regulation and transparency are essential

📘 Exam Tip

Understand the mechanics of carbon credits (additionality, baseline, MRV) and the difference between compliance and voluntary markets. Use Indian case studies (e.g., Bastar, cookstoves) to critique real-world implementation—focus on equity, transparency, and community impact. Discuss the potential and pitfalls of India’s CCTS, emphasizing the need for inclusive and verifiable carbon markets.

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