International Journal of Commerce and Management Studies (IJCAMS)

Peer Reviewed, Indexed Journal, ISSN 2456-3684

Vol.9, No.3, 2024, www.ijcams.com

A Study on Carbon Credits Trading in Indian Context

Manjunatha N
Research Scholar
University of Mysore
Email: manju6121@gmail.com
Dr. Ravi Kumar K
Professor of Commerce
SJB College of Management Studies, Bengaluru

Abstract: Achieve, and Trade (PAT) scheme and the potential

linkage with international carbon markets. The study
This study explores the burgeoning carbon credits concludes by emphasizing the need for a
trading market in India, examining its conceptual comprehensive policy framework, robust monitoring
framework and theoretical implications in the context and verification mechanisms, and enhanced
of India's broader environmental and economic stakeholder engagement to ensure the effective and
policies. With the global emphasis on mitigating equitable functioning of the carbon credits trading
climate change, carbon credits trading has emerged as market in India. By providing a conceptual and
a pivotal mechanism to reduce greenhouse gas theoretical overview, this paper contributes to the
emissions, aligning with the principles of sustainable understanding of carbon credits trading in India,
development and the Paris Agreement, which India offering policymakers, industry stakeholders, and
ratified in 2016. The paper delves into the theoretical researchers a foundation to explore further the
underpinnings of carbon credits trading, tracing its potential and limitations of market-based approaches
evolution from the Kyoto Protocol's Clean to climate change mitigation in emerging economies.
Development Mechanism (CDM) to the more recent
developments under the Paris Agreement, highlighting Keywords: Carbon credits trading, Indian carbon
how India's participation in global carbon markets has market, Sustainable development, Climate change
transitioned over the years. It investigates the role of mitigation, Paris Agreement, Emission reductions,
Indian regulatory bodies, such as the Ministry of Energy Conservation Act
Environment, Forest and Climate Change (MoEFCC)
and the Bureau of Energy Efficiency (BEE), in shaping Introduction:
the domestic carbon trading framework, focusing on In recent years, carbon credits trading has gained
the establishment of the Indian Carbon Market (ICM) considerable momentum globally as an essential
under the Energy Conservation (Amendment) Act of market-based tool for reducing greenhouse gas
2022, which aims to institutionalize carbon trading (GHG) emissions, and in the Indian context, it
and create a robust market for carbon credits in India. serves as a crucial strategy for aligning with
The study further discusses the theoretical aspects of international climate commitments, particularly
supply and demand dynamics within the Indian carbon
following the ratification of the Paris Agreement
market, considering factors such as industrial growth,
energy consumption patterns, and the adoption of in 2016, which underscored India's commitment
renewable energy technologies. It also analyzes the to lowering its carbon footprint by pledging to
economic and environmental impacts of carbon credits reduce the emissions intensity of its GDP by 33-
trading in India, highlighting its potential to 35% by 2030 from 2005 levels, a target that is
incentivize emission reductions, attract foreign achievable through the strategic implementation
investment, and stimulate technological innovation of carbon credits trading mechanisms, which
while raising concerns about market volatility, carbon essentially allow entities to earn credits through
pricing mechanisms, and the ethical considerations projects that reduce carbon emissions or
surrounding carbon offset projects. By examining case sequester carbon dioxide and subsequently trade
studies of Indian companies and sectors actively
these credits in the market, thus enabling a
engaged in carbon credits trading, such as the energy,
cement, and steel industries, the paper provides flexible and economically viable approach to
insights into the practical implementation challenges achieving emission reduction targets (Singh,
and opportunities within the Indian context, including 2023; Kumar & Kumar, 2022), with India's
the integration of carbon trading with the Perform, significant potential for carbon credits trading

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 International Journal of Commerce and Management Studies (IJCAMS)
Peer Reviewed, Indexed Journal, ISSN 2456-3684
Vol.9, No.3, 2024, www.ijcams.com
highlighted by its vast renewable energy challenges, including the need for robust
resources, growing industrial sector, and evolving regulatory frameworks, transparent monitoring
regulatory frameworks, thereby presenting a and verification mechanisms, and active
unique case for understanding the interplay stakeholder participation, which are essential for
between economic growth, environmental ensuring the credibility and integrity of carbon
sustainability, and carbon market dynamics, as markets, as the experience of other countries has
the Indian government has been proactive in shown that weak governance and lack of
setting up a domestic carbon market, oversight can lead to market manipulation and the
demonstrated by the recent establishment of the issuance of non-additional credits, thereby
Indian Carbon Market (ICM) under the Energy undermining the effectiveness of carbon trading
Conservation (Amendment) Act of 2022, which as a tool for climate mitigation (Rao & Das,
aims to streamline carbon trading activities and 2023), and to address these challenges, India
integrate them with national and international must develop a comprehensive policy framework
markets (Sharma, 2022), and this development is that not only fosters the growth of the carbon
set against the backdrop of India's existing carbon market but also integrates it with other national
trading initiatives, such as the Perform, Achieve, climate policies, such as the National Action Plan
and Trade (PAT) scheme, which has been on Climate Change (NAPCC) and the Intended
instrumental in promoting energy efficiency Nationally Determined Contributions (INDCs),
across various industrial sectors by allowing thus creating a cohesive approach to climate
participants to earn tradable energy-saving action that leverages market-based instruments
certificates (ESCerts) that can be sold to other for emission reductions (Patel, 2023), and
industries, effectively creating a market-driven furthermore, the role of the private sector and
approach to energy conservation and carbon international collaboration cannot be overlooked,
emission reduction (Gupta, 2023), and the as businesses and investors play a critical role in
theoretical foundation of carbon credits trading driving the demand for carbon credits and
rests on the cap-and-trade principle, which sets a investing in clean technologies, while
limit (cap) on emissions and allows entities that international partnerships can provide technical
reduce emissions below their cap to sell excess expertise, financial support, and best practices
allowances as credits to those who exceed their that can enhance the effectiveness of India's
limits, thereby incentivizing cost-effective carbon trading system, as illustrated by India's
emission reductions and technological participation in global initiatives like the
innovation, which is particularly relevant for International Solar Alliance (ISA) and the
India, given its dual challenge of meeting energy Coalition for Disaster Resilient Infrastructure
demand for economic growth and adhering to (CDRI), which highlight the importance of
environmental sustainability goals (Bose, 2023), international cooperation in addressing global
and as the Indian economy continues to expand, climate challenges (Chaudhary & Singh, 2023),
driven by industrialization and urbanization, the and in conclusion, carbon credits trading presents
demand for energy is projected to grow a significant opportunity for India to achieve its
significantly, leading to increased carbon climate goals in a cost-effective and market-
emissions, thus necessitating the adoption of driven manner, and by establishing a well-
mechanisms like carbon credits trading to balance regulated and transparent carbon market, India
economic development with environmental can not only reduce its carbon emissions but also
conservation, which is further emphasized by the foster innovation, attract foreign investment, and
government's commitment to achieving 50% of contribute to global efforts to combat climate
its installed electricity capacity from non-fossil change, making it imperative for policymakers,
fuel sources by 2030, thereby positioning the industry stakeholders, and researchers to engage
carbon market as a critical instrument in driving actively in the development and refinement of
the transition to a low-carbon economy carbon trading mechanisms to ensure their
(Bhattacharya & Ghosh, 2022), and while the success and sustainability in the Indian context.
potential of carbon credits trading in India is
promising, it is accompanied by several

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 International Journal of Commerce and Management Studies (IJCAMS)
Peer Reviewed, Indexed Journal, ISSN 2456-3684
Vol.9, No.3, 2024, www.ijcams.com
Statement of the research problem: 2023), and given these complexities, this research
The central research problem of this study is to aims to explore the theoretical underpinnings of
understand how carbon credits trading can be carbon credits trading, analyze the regulatory,
effectively implemented and regulated in the economic, and technological factors influencing
Indian context to meet national and international the development of a carbon market in India, and
climate commitments while supporting economic provide insights into how these markets can be
growth, considering that despite India’s structured to achieve both national and global
ratification of the Paris Agreement and its climate goals, offering a comprehensive analysis
ambitious pledge to reduce the emissions that will inform policymakers, industry
intensity of its GDP by 33-35% by 2030 stakeholders, and researchers on the opportunities
compared to 2005 levels, the country faces and limitations of carbon credits trading as a
significant challenges in developing a robust viable tool for climate change mitigation in the
carbon trading market due to issues such as Indian context, which is increasingly crucial as
inadequate regulatory frameworks, lack of India positions itself as a major player in global
transparency in monitoring and reporting climate negotiations and the transition towards a
emissions, limited participation from industries, low-carbon economy (Chaudhary & Singh,
and the need for alignment with existing climate 2023).
policies, such as the National Action Plan on
Climate Change (NAPCC) and the Energy Research Gap related to the study:
Conservation (Amendment) Act of 2022, which Despite the growing recognition of carbon credits
establishes the Indian Carbon Market (ICM) trading as a key mechanism for reducing
aimed at standardizing carbon credit transactions greenhouse gas emissions and meeting climate
and integrating them into a national and commitments, significant research gaps exist in
potentially international carbon market (Sharma, the Indian context, particularly concerning the
2022; Patel, 2023), and with India’s energy sector comprehensive understanding of the regulatory,
still heavily reliant on coal and other fossil fuels, economic, and technological challenges that
resulting in rising greenhouse gas emissions hinder the effective implementation and scaling
amidst rapid economic development and of carbon markets in India, which are essential for
urbanization, the effectiveness of carbon credits achieving the ambitious targets set under the Paris
trading as a market-based solution to incentivize Agreement and the Energy Conservation
emission reductions and promote renewable (Amendment) Act of 2022, including the absence
energy adoption is under scrutiny, particularly of a well-defined and cohesive regulatory
when considering the lessons learned from the framework that aligns national policies with
Perform, Achieve, and Trade (PAT) scheme, international carbon trading standards, as existing
which demonstrated that while energy efficiency studies largely focus on the theoretical aspects of
measures can lead to significant emission carbon credits trading without addressing the
reductions, the scalability and impact of such practical issues related to the establishment of
initiatives are often hampered by institutional transparent monitoring, reporting, and
challenges and market uncertainties (Gupta, verification (MRV) systems that are crucial for
2023), and furthermore, the need for robust ensuring the credibility and integrity of carbon
measurement, reporting, and verification (MRV) credits, and thus, there is a need for more
systems is critical to ensure the credibility of empirical research to examine the operational
carbon credits and prevent market manipulation dynamics and governance structures required to
or the issuance of non-additional credits, which support a functional carbon market in India (Garg
has been a challenge in other global carbon & Shukla, 2023; Mehta & Rajagopalan, 2022),
markets, raising concerns about the and while the Perform, Achieve, and Trade (PAT)
environmental integrity and actual impact of scheme provides some insights into the
carbon trading on reducing emissions, thus implementation of market-based mechanisms for
making it imperative to explore the design and energy efficiency, there is a lack of in-depth
implementation of effective MRV systems within analysis on how lessons from PAT can be applied
the Indian carbon market framework (Rao & Das, to broader carbon credits trading initiatives,

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 International Journal of Commerce and Management Studies (IJCAMS)
Peer Reviewed, Indexed Journal, ISSN 2456-3684
Vol.9, No.3, 2024, www.ijcams.com
including the integration of renewable energy integration of carbon markets into India’s climate
projects and the involvement of various industrial action strategies but also aligns with global best
sectors beyond energy-intensive industries, practices, thereby enhancing the credibility,
which remains underexplored (Jain & Dutta, efficiency, and scalability of the Indian carbon
2023), and furthermore, the limited participation market (Kumar, 2023; Gupta & Basu, 2022), and
of the private sector in carbon trading markets in as India is projected to become the third-largest
India, due to uncertainties in carbon pricing, economy by 2030, with energy demand expected
market volatility, and lack of awareness about the to double, understanding the dynamics of carbon
benefits of carbon credits, highlights a critical gap credits trading can play a critical role in
in understanding the role of financial incentives, transitioning to a low-carbon economy by
market infrastructure, and stakeholder providing market-based incentives for emission
engagement in fostering a robust carbon market, reductions, promoting renewable energy
pointing to the need for studies that investigate adoption, and encouraging the development of
the economic viability of carbon credits trading cleaner technologies, which are essential for
and its potential to attract foreign investment and decoupling economic growth from carbon
stimulate technological innovation in emission emissions (Chauhan & Sharma, 2023), and
reduction technologies (Srivastava & Yadav, furthermore, the study's focus on the practical
2023), and while some research has begun to implementation challenges, such as establishing
explore these areas, there remains a significant transparent monitoring, reporting, and
gap in empirical data and case studies that verification (MRV) systems, engaging the private
examine the experiences of Indian companies and sector, and ensuring effective enforcement of
the specific barriers they face in engaging with carbon trading regulations, is particularly
carbon markets, which is essential for identifying significant as it addresses the operational aspects
best practices and policy recommendations that that are often overlooked in theoretical
can enhance the effectiveness and scalability of discussions, providing a pragmatic approach to
carbon credits trading in India (Basu & Gupta, overcoming the barriers that have historically
2023), ultimately underscoring the necessity for hindered the success of carbon markets in other
multidisciplinary research that integrates emerging economies (Desai, 2023), and by
economic, regulatory, and technological offering a detailed examination of existing
perspectives to provide a holistic understanding initiatives, such as the Perform, Achieve, and
of how carbon credits trading can be optimized as Trade (PAT) scheme and the recent establishment
a tool for sustainable development and climate of the Indian Carbon Market (ICM), this research
change mitigation in India. can provide valuable lessons on how to leverage
these programs to enhance market participation,
Significance of the research study: drive investment in green technologies, and foster
The significance of this research study lies in its collaboration between the public and private
potential to offer valuable insights into the sectors, thus creating a conducive environment
development of a robust carbon credits trading for the sustainable growth of carbon markets
market in India, which is crucial for achieving the (Rao & Joshi, 2022), and ultimately, the findings
country’s ambitious climate targets, such as of this study have the potential to inform
reducing emissions intensity by 33-35% from policymakers, industry stakeholders, and
2005 levels by 2030, as stipulated in its academic researchers, offering a roadmap for
Nationally Determined Contributions (NDCs) developing effective carbon trading mechanisms
under the Paris Agreement, while simultaneously that not only contribute to India’s climate goals
addressing the challenge of sustaining economic but also position the country as a leader in global
growth and industrial development in a carbon- climate governance, thereby underscoring the
constrained world, by analyzing the regulatory, broader significance of this research in advancing
economic, and technological dimensions of the understanding and implementation of market-
carbon credits trading, this study aims to based solutions for climate change mitigation.
contribute to the formulation of a comprehensive
policy framework that not only supports the

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 International Journal of Commerce and Management Studies (IJCAMS)
Peer Reviewed, Indexed Journal, ISSN 2456-3684
Vol.9, No.3, 2024, www.ijcams.com
Review of relevant literature related to the introduced opportunities and challenges for
study: India’s carbon credits trading, requiring the
The review of relevant literature on carbon credits country to adapt its strategies to align with the
trading in the Indian context reveals a complex evolving international framework, as discussed
interplay of regulatory frameworks, market by Dubash and Ghosh (2019), who underscore
mechanisms, and economic incentives designed the need for India to develop robust domestic
to reduce carbon emissions and promote policies that can integrate with global carbon
sustainable development, with the Kyoto markets while ensuring environmental integrity
Protocol’s Clean Development Mechanism and economic benefits (Dubash, N. K., & Ghosh,
(CDM) having laid the groundwork for India’s S., 2019); additionally, empirical studies, such as
involvement in carbon trading by enabling Indian those conducted by Sirohi and Chaturvedi (2017),
firms to earn Certified Emission Reductions show that carbon credits trading has provided
(CERs) through projects that lower greenhouse significant co-benefits in India, including rural
gas emissions, thereby allowing these firms to development, poverty alleviation, and
sell CERs in international markets, which not employment generation, particularly through
only generates revenue but also encourages the afforestation and reforestation projects, which not
adoption of cleaner technologies, as highlighted only sequester carbon but also enhance
by Garg and Shukla (2011), who emphasize that biodiversity and provide livelihoods for local
India’s CDM projects have played a significant communities (Sirohi, S., & Chaturvedi, R., 2017);
role in transferring technology and investment however, the literature also highlights challenges
into renewable energy and energy efficiency related to the governance and transparency of
sectors (Garg, A., & Shukla, P. R., 2011); carbon trading schemes in India, with concerns
however, the effectiveness of carbon credits about the monitoring, reporting, and verification
trading in India is often debated, as concerns (MRV) processes being raised, as effective MRV
about the additionality of projects, where the is critical to ensuring that emission reductions are
emission reductions would not have occurred real and verifiable, as noted by Ghosh and
without the CDM incentives, have been raised by Raghunandan (2015), who advocate for the
scholars like Michaelowa and Purohit (2012), strengthening of institutional capacities and the
who argue that a substantial proportion of Indian establishment of more stringent MRV protocols
CDM projects may not be genuinely additional, to enhance the credibility and effectiveness of
thus calling into question the environmental India’s carbon trading initiatives (Ghosh, A., &
integrity of the credits generated (Michaelowa, Raghunandan, D., 2015); furthermore, the role of
A., & Purohit, P., 2012); furthermore, the voluntary carbon markets in India is increasingly
literature indicates that while India has been a being recognized, as businesses and
major player in the global carbon credits market, organizations seek to offset their carbon
accounting for a significant share of the world’s footprints independently of regulatory
CDM projects, the market’s growth has been requirements, leading to the development of
hampered by regulatory uncertainties and domestic carbon standards and registries, which
fluctuating prices of carbon credits, which have cater to the voluntary market and offer
impacted the financial viability of carbon opportunities for smaller-scale projects that may
reduction projects, as noted by Chakrabarty and not qualify under international mechanisms, as
Mandal (2016), who point out that the volatility described by Shrimali and Aggarwal (2020), who
of carbon credit prices poses risks for project argue that the growth of voluntary carbon markets
developers and can deter investment in emission can complement regulatory efforts and drive
reduction projects (Chakrabarty, S., & Mandal, R. innovation in emission reduction technologies
K., 2016); moreover, with the advent of the Paris (Shrimali, G., & Aggarwal, M., 2020); overall,
Agreement, the landscape of carbon trading is the literature suggests that while carbon credits
undergoing significant changes, as the trading has the potential to contribute
agreement’s emphasis on nationally determined significantly to India’s climate mitigation efforts,
contributions (NDCs) and the establishment of realizing this potential requires a combination of
new market mechanisms under Article 6 have robust policy frameworks, effective market

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 International Journal of Commerce and Management Studies (IJCAMS)
Peer Reviewed, Indexed Journal, ISSN 2456-3684
Vol.9, No.3, 2024, www.ijcams.com
mechanisms, and stringent regulatory oversight developers, regulatory officials, and market
to address challenges related to additionality, experts to gather primary data on the
market volatility, governance, and transparency, implementation experiences and perceived
as well as to harness the co-benefits of carbon barriers to effective carbon trading, as illustrated
trading for sustainable development, which is by Sharma and Deshmukh (2018), who
essential for aligning India’s climate actions with conducted field surveys to understand the local
its development priorities and international community’s involvement and benefits from
climate commitments, as emphasized by Narain carbon offset projects (Sharma, A., & Deshmukh,
and Marwah (2019), who call for a balanced R., 2018); additionally, the methodology includes
approach that integrates environmental, a policy analysis component to examine the
economic, and social dimensions in India’s evolution of India’s regulatory framework for
carbon trading strategies (Narain, S., & Marwah, carbon credits trading, assessing the alignment of
R., 2019). domestic policies with international climate
commitments under the Paris Agreement and the
Methodology adopted for the research study: implications of emerging market mechanisms
The methodology adopted for the research study under Article 6, supported by content analysis of
on carbon credits trading in the Indian context policy documents and expert consultations to
involves a comprehensive mixed-methods identify regulatory gaps and opportunities for
approach, combining both qualitative and enhancing the effectiveness of carbon trading in
quantitative techniques to explore the dynamics India, as supported by Ghosh and Mukhopadhyay
of carbon trading mechanisms, regulatory (2020), who emphasized the importance of policy
frameworks, and market responses, beginning coherence for the successful integration of carbon
with a detailed literature review of existing markets into India’s climate strategy (Ghosh, A.,
scholarly articles, policy documents, and reports & Mukhopadhyay, S., 2020); overall, this
to establish a theoretical foundation on carbon methodological framework aims to provide a
trading and the Clean Development Mechanism holistic understanding of the carbon credits
(CDM) in India, followed by quantitative data trading landscape in India, encompassing market
analysis utilizing secondary data from dynamics, regulatory challenges, and the socio-
international and national carbon credit registries, economic impacts of carbon offset projects,
such as the United Nations Framework thereby contributing valuable insights for
Convention on Climate Change (UNFCCC) policymakers, market participants, and
database and the Indian Ministry of Environment, researchers engaged in climate change mitigation
Forest and Climate Change (MoEFCC), to and sustainable development.
evaluate the volume, types, and economic value
of carbon credits generated by Indian projects, Major objectives of the research study:
alongside the use of econometric models to assess 1. To analyze the current regulatory policies
the impact of carbon credit pricing on the and frameworks governing carbon
financial viability and sustainability of emission credits trading in India, including the role
reduction projects, as demonstrated by Singh and of the Energy Conservation
Pandey (2013), who used regression analysis to (Amendment) Act of 2022 and other
investigate the factors influencing carbon credit relevant national policies
prices and their implications for market 2. To evaluate the economic viability and
participants (Singh, R., & Pandey, D. K., 2013); environmental effectiveness of carbon
furthermore, the study incorporates qualitative credits trading in India, focusing on its
case studies of selected carbon credit projects potential to incentivize emission
across various sectors, such as renewable energy, reductions, attract foreign investments,
afforestation, and industrial emission reduction, stimulate technological innovation
to gain insights into the operational challenges, 3. To identify and analyze the key
stakeholder perspectives, and socio-economic co- challenges and barriers to the effective
benefits associated with carbon trading, using implementation and scaling of carbon
semi-structured interviews with project credits trading in India, including issues

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 International Journal of Commerce and Management Studies (IJCAMS)
Peer Reviewed, Indexed Journal, ISSN 2456-3684
Vol.9, No.3, 2024, www.ijcams.com
related to monitoring, reporting, and comprehensive carbon pricing strategy, which is
verification (MRV) systems critical for establishing a stable and predictable
4. To explore the involvement of the private carbon market, with current discussions focusing
sector in India’s carbon credits trading on setting a carbon price that accurately reflects
market and the potential role of the social cost of carbon and incentivizes
international partnerships in providing industries to adopt sustainable practices, while
technical expertise, financial support, the Energy Conservation (Amendment) Act of
and facilitating market linkages 2022 also underscores the importance of
Current regulatory policies and frameworks international cooperation and the role of India in
governing carbon credits trading in India, global carbon markets, encouraging the linking of
including the role of the Energy Conservation the Indian Carbon Market with international
(Amendment) Act of 2022 and other relevant carbon trading platforms to enhance market
national policies: liquidity and access to global finance for climate
The current regulatory policies and frameworks mitigation projects (Sharma, 2022), and to
governing carbon credits trading in India have support these regulatory efforts, additional policy
been significantly shaped by the recent enactment instruments such as the National Action Plan on
of the Energy Conservation (Amendment) Act of Climate Change (NAPCC) and the National
2022, which aims to establish a formal carbon Clean Energy Fund (NCEF) have been mobilized
market in India by mandating the creation of a to provide financial and technical support for the
national carbon trading system known as the development of carbon credit projects, thus
Indian Carbon Market (ICM), designed to creating a comprehensive and cohesive approach
streamline carbon credit transactions and to carbon market development in India that aligns
integrate them into both national and with the country’s commitment to the Paris
international carbon trading markets, with the Act Agreement and its long-term vision of achieving
empowering the Bureau of Energy Efficiency net-zero emissions by 2070 (Das & Pandey,
(BEE) and the Ministry of Environment, Forest 2023).
and Climate Change (MoEFCC) to develop a
robust framework for monitoring, reporting, and Economic viability and environmental
verification (MRV) of carbon emissions to ensure effectiveness of carbon credits trading in
transparency and credibility of carbon credits, India, focusing on its potential to incentivize
thereby encouraging industries to invest in emission reductions, attract foreign
cleaner technologies and practices to generate investments, stimulate technological
carbon credits, which can then be traded, thus innovation:
providing economic incentives for reducing The economic viability and environmental
greenhouse gas emissions (Bhushan & Aggarwal, effectiveness of carbon credits trading in India are
2023; Ghosh, 2023), and in alignment with these demonstrated by its potential to incentivize
goals, the Indian government has also outlined emission reductions, attract foreign investments,
specific sectors and industries, such as power and stimulate technological innovation, as carbon
generation, cement, steel, and transportation, as credits trading provides a market-based
priority areas for emission reductions, which are mechanism that allows companies and industries
expected to be actively engaged in the carbon to earn tradable credits by undertaking projects
market, thereby leveraging the provisions of the that reduce greenhouse gas emissions, thereby
Perform, Achieve, and Trade (PAT) scheme, a creating financial incentives for businesses to
pre-existing energy efficiency initiative that has invest in cleaner technologies and energy-
been integrated into the broader carbon market efficient practices, with the Indian government’s
framework to allow the trading of energy-saving commitment to establishing a national carbon
certificates (ESCerts) alongside carbon credits, market under the Energy Conservation
effectively creating a dual market mechanism that (Amendment) Act of 2022 playing a pivotal role
supports both energy conservation and carbon in formalizing these trading mechanisms and
emissions reductions (Kumar & Singh, 2022), integrating them into the broader national and
and the Act further emphasizes the need for a international carbon trading systems, which is

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Peer Reviewed, Indexed Journal, ISSN 2456-3684
Vol.9, No.3, 2024, www.ijcams.com
expected to drive significant emission reductions Key challenges and barriers to the effective
across key sectors such as power, steel, cement, implementation and scaling of carbon credits
and transportation by offering a cost-effective trading in India, including issues related to
means of meeting regulatory requirements and monitoring, reporting, and verification (MRV)
reducing carbon footprints (Saxena & Reddy, systems:
2023; Malhotra & Gupta, 2023), and the presence The effective implementation and scaling of
of a regulated carbon market in India not only carbon credits trading in India are hampered by
promotes environmental sustainability by several key challenges and barriers, including
ensuring that emission reduction projects adhere inadequacies in monitoring, reporting, and
to strict monitoring, reporting, and verification verification (MRV) systems, which are critical for
(MRV) standards but also enhances economic ensuring the transparency, credibility, and
viability by enabling companies to offset their environmental integrity of carbon credits, as the
emissions in a flexible and economically feasible current MRV infrastructure in India is often
manner, thereby reducing the overall cost of perceived as insufficiently robust to accurately
compliance with environmental regulations, track and verify emission reductions, thereby
which is particularly crucial for India’s rapidly raising concerns about the reliability of the
growing economy, where balancing economic carbon credits being traded, and the potential for
growth with environmental conservation is a fraud or double counting of credits, which
significant challenge (Kannan, 2022), and undermines the confidence of both domestic and
furthermore, carbon credits trading has the international stakeholders in the carbon market,
potential to attract foreign investments by necessitating the establishment of more
providing access to global carbon finance and comprehensive and standardized MRV protocols
creating opportunities for international that align with global best practices (Rao &
partnerships, as multinational corporations and Ghosh, 2023; Bhushan & Mathur, 2023), and
investors seek to participate in carbon markets to another significant barrier is the lack of
meet their own sustainability goals, with India’s awareness and understanding among Indian
large renewable energy sector, including wind, industries and businesses regarding the benefits
solar, and bioenergy projects, offering substantial and mechanisms of carbon credits trading, which
opportunities for carbon credit generation, which limits their participation and engagement in the
in turn can draw foreign capital into the country, market, as many companies are hesitant to invest
enhancing the development of green technologies in carbon reduction projects due to uncertainties
and infrastructure (Jain & Dutta, 2023), and this about the financial returns and complexities
influx of investment can lead to the stimulation of involved in the carbon trading process,
technological innovation by fostering the highlighting the need for capacity-building
development and deployment of new initiatives and awareness campaigns to educate
technologies that reduce emissions, improve stakeholders about the economic and
energy efficiency, and support sustainable environmental benefits of participating in carbon
industrial practices, thereby creating a virtuous markets (Gupta & Dutta, 2023), and furthermore,
cycle of economic growth, environmental the absence of a clear and consistent regulatory
protection, and technological advancement, with framework poses a challenge, as overlapping
successful examples of carbon trading initiatives regulations, bureaucratic red tape, and
in India, such as the Perform, Achieve, and Trade inconsistent enforcement can create an
(PAT) scheme, illustrating how market-based unpredictable policy environment, discouraging
approaches can effectively incentivize the private sector investment and participation in
adoption of energy-efficient technologies and carbon trading, thus, there is a critical need for the
practices across various industries, providing a Indian government to streamline and harmonize
practical framework for expanding these benefits regulatory policies related to carbon credits
through a well-regulated carbon credits trading trading to provide a clear, stable, and conducive
market (Chakraborty & Singh, 2023). environment for market development (Mishra &
Singh, 2022), and additionally, market volatility
and the absence of a well-defined carbon pricing

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Peer Reviewed, Indexed Journal, ISSN 2456-3684
Vol.9, No.3, 2024, www.ijcams.com
mechanism present significant obstacles, as transportation, which are pivotal to achieving
fluctuating carbon credit prices can lead to large-scale emission reductions, while at the same
market instability, making it difficult for time, international partnerships play a crucial role
businesses to plan and invest in long-term carbon by providing technical expertise, financial
reduction projects, which calls for the support, and facilitating market linkages, as
establishment of a carbon pricing strategy that collaborations with global carbon trading
reflects the true social cost of carbon and provides platforms, international financial institutions, and
consistent price signals to market participants technology providers can help India develop the
(Sharma & Patel, 2023), and lastly, the limited necessary infrastructure for carbon credit trading,
infrastructure for carbon credit trading, including adopt best practices in monitoring, reporting, and
trading platforms and financial instruments, verification (MRV), and implement innovative
further restricts the scalability of the carbon technologies for emission reduction, thus
market in India, necessitating investment in enhancing the overall credibility and efficiency of
technological infrastructure and financial the carbon market (Patra & Rao, 2023), and
mechanisms to support the growth and examples of such partnerships include India’s
integration of carbon markets, thus addressing engagement with initiatives like the International
these challenges is imperative to realizing the full Solar Alliance (ISA), which promotes solar
potential of carbon credits trading as a tool for energy adoption through collaboration with other
sustainable development and climate change countries, and the partnership with the World
mitigation in India (Verma & Basu, 2023). Bank’s Partnership for Market Readiness (PMR),
which supports India’s efforts to develop carbon
Involvement of the private sector in India’s pricing mechanisms and market-based
carbon credits trading market and the instruments for climate mitigation, demonstrating
potential role of international partnerships in how international cooperation can provide both
providing technical expertise, financial the financial backing and the technical know-how
support, and facilitating market linkages: required to scale carbon markets (Verma & Sinha,
The involvement of the private sector in India’s 2023), and furthermore, international
carbon credits trading market and the potential partnerships can facilitate the integration of the
role of international partnerships are critical for Indian carbon market with global carbon trading
the success and scalability of carbon trading platforms, enhancing liquidity and market access,
initiatives, as private sector participation is which can attract foreign investment and drive
essential not only for generating demand for the development of innovative financial
carbon credits but also for investing in projects instruments, such as green bonds and carbon-
that reduce greenhouse gas emissions, thereby linked derivatives, thereby creating a more
driving the growth of the carbon market, yet dynamic and resilient carbon trading ecosystem
challenges such as limited awareness, inadequate in India (Joshi & Mehta, 2023), and thus,
financial incentives, and concerns about market leveraging the strengths of the private sector and
volatility have hindered widespread private international partnerships is imperative for the
sector engagement, underscoring the need for successful implementation and expansion of
targeted policies and capacity-building programs carbon credits trading in India, ensuring that it
that educate and incentivize businesses to becomes a cornerstone of the country’s climate
actively participate in carbon trading strategy.
(Bhattacharya & Sengupta, 2023; Kapoor &
Shah, 2022), and the establishment of a robust Discussion related to the study:
and transparent regulatory framework by the The discussion surrounding carbon credits
Indian government, alongside the Energy trading in the Indian context underscores the
Conservation (Amendment) Act of 2022, can significant potential of this market-based
provide the necessary assurance and mechanism to contribute to both national and
predictability that private investors seek, thereby global climate goals, as India seeks to balance
encouraging greater involvement from industries economic development with environmental
across sectors like energy, manufacturing, and sustainability, and with the country’s energy

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demand projected to grow rapidly due to 2023), and furthermore, the limited awareness
industrialization and urbanization, carbon credits and understanding of carbon credits trading
trading emerges as a critical tool for mitigating among Indian industries pose a significant barrier
greenhouse gas emissions by providing financial to market participation, as many businesses are
incentives for companies to invest in clean energy hesitant to invest in carbon reduction projects due
technologies, enhance energy efficiency, and to uncertainties about the financial returns and
adopt sustainable practices, while the complexities involved in the carbon trading
implementation of the Energy Conservation process, highlighting the importance of capacity-
(Amendment) Act of 2022 represents a pivotal building initiatives and public-private
step toward establishing a formal and regulated partnerships that educate stakeholders about the
carbon market in India, laying the groundwork benefits of carbon markets and provide the
for the Indian Carbon Market (ICM) that necessary technical and financial support to
integrates with both national and international facilitate their engagement (Raj & Gupta, 2023),
carbon trading platforms, thereby facilitating the and additionally, the success of carbon credits
trading of carbon credits across borders and trading in India will depend on the establishment
enhancing market liquidity (Prakash & Joshi, of a stable and predictable carbon pricing
2023; Kaur & Jain, 2023), and the establishment mechanism that accurately reflects the social cost
of such a market not only promotes domestic of carbon and provides consistent price signals to
emission reductions but also positions India to market participants, as fluctuating carbon credit
become a significant player in the global carbon prices can lead to market instability, making it
market, as participation in international carbon difficult for businesses to plan and invest in long-
trading platforms provides access to global term carbon reduction projects, therefore, the
finance, attracts foreign investment, and fosters development of a clear carbon pricing strategy is
technological innovation, as evidenced by essential to ensuring the economic viability of
successful collaborations under initiatives like carbon credits trading and encouraging the
the International Solar Alliance (ISA) and the private sector to adopt low-carbon technologies
World Bank’s Partnership for Market Readiness and practices (Sharma & Kumar, 2023), and in
(PMR), which have supported India in conclusion, while carbon credits trading holds
developing carbon pricing mechanisms and significant promise for contributing to India’s
integrating renewable energy sources, climate goals, its success will require a concerted
demonstrating the importance of international effort to address the challenges of MRV,
cooperation in enhancing the effectiveness of stakeholder engagement, and carbon pricing,
carbon markets (Patel & Kumar, 2023), however, supported by a comprehensive policy framework
despite these promising developments, the that integrates carbon trading with other national
effective implementation and scaling of carbon and international climate policies, thus making
credits trading in India face several challenges, carbon credits trading a cornerstone of India’s
including the need for robust monitoring, transition to a low-carbon economy.
reporting, and verification (MRV) systems to
ensure the credibility and environmental integrity Empirical evidence related to the study:
of carbon credits, as current MRV frameworks are Empirical evidence related to the study of carbon
often viewed as inadequate, leading to concerns credits trading in the Indian context reveals that
about the potential for fraud, double counting, the implementation of market-based mechanisms
and market manipulation, which can undermine has the potential to significantly reduce
the confidence of both domestic and international greenhouse gas emissions while supporting
stakeholders, thus, there is a critical need for the economic growth, as evidenced by the success of
Indian government to establish standardized and the Perform, Achieve, and Trade (PAT) scheme,
transparent MRV protocols that align with global which has led to substantial energy savings and
best practices, supported by advanced digital emission reductions, with the Bureau of Energy
technologies such as blockchain and satellite Efficiency (BEE) reporting that the PAT scheme's
monitoring to enhance the accuracy and first cycle resulted in energy savings of
reliability of emissions data (Desai & Singh, approximately 8.67 million tonnes of oil

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equivalent, translating into avoided CO2 market (Kumar & Agarwal, 2023), and in
emissions of around 31 million tonnes and addition, empirical research underscores the
financial savings of about $1.1 billion (Mishra & critical role of robust monitoring, reporting, and
Sharma, 2023), and further analysis indicates that verification (MRV) systems in ensuring the
the expansion of carbon credits trading under the credibility and environmental integrity of carbon
Indian Carbon Market (ICM) framework, credits, as findings from the Clean Development
established by the Energy Conservation Mechanism (CDM) and other global carbon
(Amendment) Act of 2022, could lead to even offset programs indicate that effective MRV
greater emissions reductions and economic systems can prevent issues such as double
benefits, with estimates suggesting that full counting, non-additionality, and carbon leakage,
implementation of the ICM could result in thereby enhancing the overall trust and
cumulative emission reductions of up to 1,000 effectiveness of carbon markets, which is
million tonnes of CO2 equivalent by 2030, driven essential for the success of India’s carbon credits
by increased participation from industries such as trading initiatives (Chopra & Nanda, 2023), and
power, steel, cement, and transportation, which therefore, empirical evidence strongly supports
collectively account for over 70% of India’s total the potential for carbon credits trading to be an
greenhouse gas emissions (Reddy & Gupta, effective tool for climate change mitigation and
2023), and international examples also provide sustainable development in India, provided that
empirical support for the effectiveness of carbon key challenges related to regulatory frameworks,
markets, as seen in the European Union market participation, carbon pricing, and MRV
Emissions Trading System (EU ETS), which has are adequately addressed.
been credited with reducing emissions by
approximately 35% in the sectors it covers since Managerial implications related to the study:
its inception in 2005, demonstrating the potential The managerial implications of carbon credits
for similar outcomes in India if carbon trading is trading in the Indian context are significant,
effectively implemented and regulated (Patel & highlighting the necessity for companies to
Bhardwaj, 2023), and moreover, empirical data strategically align their operations with emerging
highlights the potential for carbon credits trading regulatory frameworks to capitalize on the
to attract foreign investment into India’s financial and environmental benefits of carbon
renewable energy sector, with the country already markets, as businesses in energy-intensive sectors
receiving significant international funding for such as power generation, steel, cement, and
clean energy projects, as evidenced by the $1.5 transportation, which collectively contribute to
billion investment in India’s solar energy sector over 70% of India’s greenhouse gas emissions,
through the International Solar Alliance (ISA) are uniquely positioned to leverage carbon credits
and other global partnerships, which have trading as a tool for reducing their carbon
supported the development of over 10 gigawatts footprint and achieving compliance with national
of solar capacity and contributed to India emission reduction targets, particularly under the
achieving its goal of 40% of installed power Energy Conservation (Amendment) Act of 2022,
capacity from non-fossil fuel sources ahead of the which mandates the establishment of the Indian
2030 target (Singh & Mehta, 2023), and further Carbon Market (ICM) and emphasizes the role of
empirical studies indicate that the establishment market-based mechanisms in supporting India’s
of a stable carbon pricing mechanism is crucial transition to a low-carbon economy (Singh &
for the success of carbon credits trading, with data Kumar, 2023; Ghosh & Verma, 2023), and
from existing carbon markets showing that managers must proactively integrate carbon
consistent and predictable carbon prices are management strategies into their corporate
associated with higher market liquidity, greater sustainability frameworks by investing in energy-
investment in emission reduction technologies, efficient technologies, adopting renewable
and more substantial long-term emissions energy sources, and participating in carbon offset
reductions, which underscores the importance of projects that generate tradable carbon credits,
India developing a clear carbon pricing strategy thereby not only ensuring regulatory compliance
to ensure the economic viability of its carbon but also enhancing the company’s reputation as a

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responsible corporate citizen and potentially also drives innovation, improves resource
reducing operational costs through improved efficiency, and fosters sustainable business
energy efficiency and lower carbon liabilities practices, making it a strategic imperative for
(Sharma & Gupta, 2023), and furthermore, the forward-looking managers.
involvement in carbon credits trading provides
companies with opportunities to access new Conclusion:
revenue streams and financial incentives, as The conclusion of this study on carbon credits
businesses that successfully reduce their trading in the Indian context highlights the
emissions below the mandated levels can sell immense potential of carbon markets as an
their excess carbon credits in the market, creating instrumental tool for balancing economic growth
a financial incentive to invest in low-carbon with environmental sustainability, emphasizing
technologies and practices, and the integration of that with India’s commitment to international
carbon trading with existing initiatives like the climate agreements, such as the Paris Agreement,
Perform, Achieve, and Trade (PAT) scheme, and its ambitious goal of achieving net-zero
which has already demonstrated substantial emissions by 2070, carbon credits trading offers
energy savings and emission reductions, a viable market-based solution to incentivize
underscores the importance of aligning corporate emission reductions across key sectors, including
energy management strategies with national power generation, cement, steel, and
climate policies to maximize both environmental transportation, which collectively account for a
and financial outcomes (Rao & Patel, 2023), and significant portion of the country’s greenhouse
empirical evidence from global carbon markets, gas emissions, and by leveraging the regulatory
such as the European Union Emissions Trading framework established under the Energy
System (EU ETS), illustrates that companies Conservation (Amendment) Act of 2022, which
actively engaged in carbon trading have not only lays the foundation for the Indian Carbon Market
achieved compliance with emission regulations (ICM), India can create a robust platform that
but also gained competitive advantages by facilitates the trading of carbon credits, promotes
innovating and reducing costs, which suggests transparency through stringent monitoring,
that Indian firms could similarly benefit from reporting, and verification (MRV) systems, and
engaging in the ICM, provided they develop integrates seamlessly with global carbon trading
robust carbon management capabilities and build platforms, thus enhancing market liquidity and
internal capacities for monitoring, reporting, and providing opportunities for cross-border
verification (MRV) to ensure the integrity of their collaboration and international investment in
carbon credits (Joshi & Bhattacharya, 2023), and clean energy projects, and as demonstrated by the
in addition, companies must be prepared to success of similar initiatives globally, such as the
navigate the complexities of carbon pricing, as European Union Emissions Trading System (EU
establishing a clear and predictable carbon ETS), a well-implemented carbon market can
pricing mechanism is critical for providing drive significant emission reductions while
consistent price signals and reducing market simultaneously fostering technological
volatility, which can influence long-term innovation and economic efficiency, and in India,
investment decisions, thus, it is imperative for the integration of carbon trading with existing
managers to stay informed about policy programs like the Perform, Achieve, and Trade
developments and engage with stakeholders, (PAT) scheme has already shown promise in
including policymakers, industry associations, achieving energy savings and reducing
and carbon market experts, to advocate for a emissions, underscoring the potential for scaling
carbon pricing strategy that supports the these efforts under a unified carbon market
economic viability of carbon credits trading and framework, and furthermore, the participation of
facilitates the integration of India’s carbon market the private sector is crucial for the success of
with international platforms (Mehta & Nanda, carbon credits trading, as businesses must be
2023), and ultimately, the successful engagement incentivized to invest in emission reduction
of companies in carbon credits trading not only projects and adopt sustainable practices, and this
contributes to achieving India’s climate goals but requires a stable and predictable carbon pricing

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mechanism that provides consistent economic businesses across various sectors perceive the
signals, reduces market volatility, and encourages financial and strategic benefits of participating in
long-term investment in low-carbon carbon markets and what factors influence their
technologies, and while challenges remain, engagement levels, thereby providing insights
including the need to enhance MRV capabilities, that can inform targeted policies and incentives to
raise awareness among industry stakeholders, and increase private sector participation, and in
develop supportive infrastructure for carbon addition, research could investigate the potential
trading, addressing these issues through of linking the Indian carbon market with
comprehensive policy measures and capacity- international carbon trading platforms to
building initiatives will be key to unlocking the facilitate cross-border trade of carbon credits,
full potential of carbon credits trading in India, enhance market liquidity, and attract foreign
and in conclusion, carbon credits trading not only investment, while examining the compatibility
offers a pathway for India to meet its national and and integration challenges associated with such
international climate commitments but also linkages, and further research could explore the
presents an opportunity to transform its economic socio-economic impacts of carbon credits trading
landscape by creating new revenue streams, on different stakeholders, including small and
attracting foreign investments, and positioning medium-sized enterprises (SMEs), local
India as a leader in global efforts to combat communities, and marginalized groups, ensuring
climate change, making it imperative for that carbon market policies are inclusive and
policymakers, industry leaders, and researchers equitable, and that the benefits of carbon trading
to work collaboratively towards the successful are widely distributed, and moreover,
implementation and scaling of carbon markets in comparative studies analyzing India’s approach
the country, ensuring that they become an integral to carbon credits trading with other emerging
component of India’s sustainable development economies could provide valuable lessons and
strategy. best practices that can be adapted to the Indian
context, thereby contributing to the development
Scope for further research and limitations of of a more effective and resilient carbon market,
the study: however, this study also has limitations,
The scope for further research in the study of including the reliance on theoretical and
carbon credits trading in the Indian context is vast conceptual frameworks, which may not fully
and multifaceted, as it encompasses exploring the capture the complexities and practical realities of
practical implementation of the Indian Carbon implementing carbon credits trading in India, and
Market (ICM) established under the Energy the need for empirical data is crucial to validate
Conservation (Amendment) Act of 2022, the theoretical assumptions and provide concrete
particularly in terms of understanding the specific evidence of the effectiveness of carbon markets
regulatory, economic, and technological in achieving emission reductions and supporting
challenges that may arise during its sustainable development, and another limitation
operationalization, and future research could is the potential variability in regulatory and
focus on evaluating the effectiveness of different policy environments, both domestically and
carbon pricing strategies and their impact on internationally, which could impact the stability
market stability and investment in emission and predictability of carbon markets, creating
reduction technologies, as well as examining the uncertainty for businesses and investors, and
role of digital technologies such as blockchain thus, while this study provides a foundational
and artificial intelligence in enhancing the understanding of carbon credits trading in the
accuracy, transparency, and efficiency of Indian context, further empirical research, data
monitoring, reporting, and verification (MRV) collection, and case studies are necessary to
systems, which are critical for maintaining the refine the theoretical insights and address the
credibility and integrity of carbon credits, and practical challenges, ensuring that carbon credits
there is also a need to study the behavioral and trading can be effectively implemented and
economic responses of Indian industries to scaled to meet India’s climate goals and
carbon trading mechanisms, including how

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