India announces domestic voluntary carbon market scheme

India's Ministry of Power announced a carbon offset market in a notice released Dec. 19, indicating a reversal from their previous stance that there would not be a domestic offset market so soon.

The Central Government and the Bureau of Energy Efficiency said the Carbon Credit Trading Scheme 2023 will henceforth be referred to as the Principal Scheme and made several amendments to the scheme, according to the notice.

Most notably, both reduction and removal projects are to be part of the scheme.

Obligated entities will be given a target for emissions reduction in the compliance mechanism, while non-obligated entities can register their projects as per the published sectoral methodologies for accounting greenhouse gases emission reduction, removal, or avoidance for issuance of Carbon Credit Certificates in the offset mechanism.

Earlier, the government had scrapped the voluntary scheme and announced details of a compliance sector which would be functional from 2026.

"This seems like they have put back in all the elements of the offset market they originally planned for," a New Delhi-based market source said. "We still need more details, but from the looks of it they are determined to move ahead with a separate offset market."

Under the scheme, the Bureau will identify the sectoral scope in which non-obligated entities may register for generating carbon credits and the methodologies to be used under the offset mechanism.

Alignment with global VCM market

There were no details whether carbon credits from existing standards in the global voluntary market will be allowed under this market, but sources said the BEE has had active consultations and considered including some which may meet higher integrity standards.

"I think that part is still not clear, they will try and promote some new home-grown standards as well but may go the Singapore route to allow high-integrity credits from the likes of Verra or Gold Standard," a source close to the matter said. "They are still evaluating."

The threshold of offset credits that could be used for compliance scheme was also under consideration, with sources saying the government could emulate what South Korea and China have done, thus keeping it between 5%-10%.

India's compliance carbon market is set to kick off from 2026 with the most hard-to-abate sectors such as steel, iron ore, refineries, petrochemicals and aluminum, among others.