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India’s Carbon Trading Scheme: Opportunities and Challenges

12:37 PM Apr 23, 2023 IST | Florence Das
india’s carbon trading scheme  opportunities and challenges

India is preparing to launch a domestic carbon market with the release of a draft carbon trading scheme. This scheme aims to incentivize companies to reduce their carbon emissions by allowing them to trade carbon credits with other companies. While this is a step towards a low-carbon economy, there are both opportunities and challenges to consider.


The proposed carbon trading scheme in India presents an opportunity to promote the adoption of low-carbon technologies and reduce greenhouse gas emissions. This would be done by providing a market-based incentive for companies to reduce their carbon footprint. Companies that invest in renewable energy projects or adopt energy-efficient technologies can earn carbon credits. Then these credits can be sold to other companies that are struggling to meet their emission reduction targets. This creates a market for carbon credits, which encourages innovation and investment in low-carbon solutions and accelerates the transition toward a low-carbon economy.



The implementation of a carbon trading scheme also poses several challenges. One of the main challenges is ensuring the accuracy and reliability of monitoring, reporting, and verifying carbon emissions. The success of the scheme will depend on the ability to accurately measure and report emissions from various sources and ensure the integrity of the carbon market. This requires robust monitoring and reporting systems and a strong regulatory framework that ensures the transparency and accuracy of data.

Another challenge is the need for capacity building and awareness among companies, especially small and medium-sized enterprises (SMEs), to effectively participate in the carbon trading scheme. SMEs may not have the resources or expertise to understand and comply with the complex rules and procedures of carbon trading. Thus, adequate capacity-building and awareness-raising programs are necessary to ensure the participation of all companies in the carbon market.


Moreover, some environmental groups have expressed concerns that a carbon trading scheme may not be effective in reducing emissions. Rather, would allow companies to continue polluting while purchasing carbon credits. There is a risk that companies may use carbon credits to offset their emissions instead of reducing them, leading to a false sense of progress. Therefore, it is crucial to have a strong regulatory framework that ensures the reduction of emissions. Furthermore, encourages the adoption of low-carbon solutions.


India’s proposed carbon trading scheme presents an opportunity to incentivize companies to reduce their carbon emissions. In addition, promote low-carbon technologies, and accelerate the transition towards a low-carbon economy. However, its success will depend on the accuracy and reliability of monitoring and reporting carbon emissions, the strength of the regulatory framework, and the capacity building of all stakeholders, especially SMEs.

It is important to ensure the integrity of the carbon market and the reduction of emissions while promoting the adoption of low-carbon solutions. The government’s call for public comments on the draft scheme is a welcome step towards ensuring that the scheme reflects the needs and concerns of all stakeholders.

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Florence Das

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