The Bureau of Energy Efficiency is likely to announce methodologies for sectors classified under phase 1 of the domestic voluntary market under India’s Carbon Credit Trading Scheme by March 2025, BEE Director Saurabh Diddi said on the sidelines of the Asia Climate Summit Oct. 22
The BEE has been the nodal body shaping India's national carbon market, which is likely to be ready to enable the trade of carbon credits in the country by 2026.
"Right at the beginning, we cannot have methodologies for each sector," Diddi told S&P Global Commodity Insights. "So that's why we divided into two phases. First phase, I think five or six sectors. We'll develop methodologies for those six. And then maybe in six months' time, we'll have second phase where [the] remaining four sector [methodologies] will also come."
The director added that the government was also likely to come up with methodologies for the sectors classified under phase 2 of the domestic voluntary market under the scheme by June.
Previously, the National Steering Committee for Indian Carbon Markets recommended 10 sectors to be included under the offset mechanism, which is the voluntary-based system in the Carbon Credit Trading Scheme and related to non-obligated entities in the country and their efforts to lower greenhouse gas emissions.
Identifying 10 sectors for the offset mechanism is a step toward pushing India to meet its goal of reducing 45% of its GHG emissions by 2030 from 2005.
Creating demand for domestic voluntary market
During one of the panel discussions, Diddi said they were exploring multiple avenues in the market to ensure demand is generated for credits in the voluntary market.
India is one of the largest suppliers of credits in the existing international voluntary carbon markets, with several project developers in the renewable energy and cookstove segments. A few project developers have recently tried to venture out into other segments in the market, such as biochars and enhanced rock weathering.
Much of the demand from major institutional buyers, such as large corporates and financial institutions, has come from entities in Europe and the US, sources said.
Diddi said one of the ways to ensure demand was generated in the domestic offset mechanism market was to get industries and the corporate sector to pledge a voluntary target to reduce their emissions, which could also help in demand generation.
"This is the most difficult question, and we are also finding answers for how to generate demand for the carbon market certificates," Diddi said during the panel discussion. "And we are looking at [it] from various perspectives."
Diddi added that they were looking at the option of selling credits to international buyers either with or without corresponding adjustment and that it was unclear for how long demand from international buyers would persist in the market without corresponding adjustment.
However, Diddi said that until buyers are interested in purchasing without a corresponding mechanism, this demand could help, adding that the BEE was also considering having a market support fund that would kick in when the market sees lean demand for carbon credits.
"The market stability reserve is there, which will also help," he said. "In case we don't have demand, then it will create an artificial demand."
