Why in the news?
- The Ministry of Environment, Forest, and Climate Change has announced a ‘National Designated Authority (NDA)’ to enable a carbon emissions trading regime.
National Designated Authority (NDA) for Carbon Markets
- Formation: It is a mandatory requirement under the provisions of the 2015 Paris Agreement (Article 6).
- Composition: A 21-member committee headed by the Secretary of the Environment Ministry.
- Includes officials from the Ministry of External Affairs, the Ministry of Renewable Energy, NITI Aayog, and the Steel Ministry.
- Functions:
- Modifying them from time to time, keeping in view national sustainable goals, country-specific criteria, and other national priorities.
- Receive projects or activities for evaluation, approval, and authorisation.
- Authorise the use of emission reduction units from projects for use towards the achievement of Nationally Determined Contributions (NDC).
Carbon Trading
- Definition:
- Carbon trading (also called emissions trading) is a market-based mechanism to reduce greenhouse gas (GHG) emissions.
- It allows countries, companies, or entities to buy and sell carbon credits/allowances, thus putting a price on carbon emissions.
- Background:
- Rooted in the Kyoto Protocol (1997) under the UNFCCC, which created three flexible mechanisms:
- Clean Development Mechanism (CDM)
- Joint Implementation (JI)
- International Emissions Trading (IET)
- Strengthened under the Paris Agreement (2015) – Article 6 provisions allow for carbon markets and international transfer of mitigation outcomes (ITMOs).
- Rooted in the Kyoto Protocol (1997) under the UNFCCC, which created three flexible mechanisms:
- Global Examples:
- EU Emissions Trading System (EU ETS) – World’s largest carbon market.
- California Cap-and-Trade Program (USA).
- China’s National ETS (2021) – Covers the power sector, world’s largest by volume.
- Carbon Trading in India:
- Earlier: India was a major beneficiary of CDM projects under Kyoto Protocol.
- Energy Conservation (Amendment) Act, 2022: Provides a legal framework for a domestic carbon market.
- National Designated Authority (NDA) notified in 2024 to oversee Article 6 compliance.
- Perform, Achieve, Trade (PAT) Scheme & Renewable Energy Certificates (RECs) already function like carbon trading.
- India is developing a Carbon Credit Trading Scheme (CCTS) to integrate with global markets.
- Significance:
- Incentivises industries to cut emissions.
- Mobilises finance for climate-friendly projects.
- Supports India’s net zero by 2070 pledge.
- Encourages global climate cooperation.