Context:
At COP29, Article 6 of the Paris Agreement became fully operational, strengthening global carbon market mechanisms. In August 2025, India entered the carbon market space by signing the Joint Crediting Mechanism (JCM) with Japan, operationalising Article 6.2 and opening new pathways for climate finance and technology transfer.
Key Highlights:
- Operationalisation at COP29
- Article 6 mechanisms finalized to improve climate finance efficiency.
- 89 cooperation arrangements under Article 6.2 across 58 Parties.
- India’s Entry into Carbon Markets
- Signing of Joint Crediting Mechanism (JCM) with Japan.
- Focus on bilateral carbon credit transfers with robust accounting safeguards.
- Identification of 13 eligible activities under Articles 6.2 and 6.4.
- Priority Sectors Identified
- Renewable energy with storage
- Green hydrogen
- Sustainable aviation fuel
- Offshore wind
- High-end energy efficiency technologies
- Institutional Measures Suggested
- Need to strengthen domestic regulatory framework.
- Proposal for a Cabinet-level steering committee.
- Streamlined project clearances and development of a removals market.
Relevant Prelims Points:
- Article 6 – Paris Agreement
- Enables voluntary cooperation between countries to achieve NDCs.
- Includes:
- Article 6.2 – Bilateral/Multilateral carbon market mechanisms.
- Article 6.4 – Centralised UN-supervised carbon credit mechanism.
- Article 6.8 – Non-market approaches.
- Joint Crediting Mechanism (JCM)
- Bilateral offset mechanism (notably used by Japan).
- Facilitates technology transfer + emission reduction sharing.
- Carbon Credits
- Tradable units representing 1 tonne of CO₂ equivalent reduced or removed.
- Used to meet Nationally Determined Contributions (NDCs).
- Removals Market
- Carbon dioxide removal activities (e.g., afforestation, carbon capture).
Relevant Mains Points:
- Climate Finance and Technology Transfer
- Bridges gap between India’s climate ambition and financial resources.
- Facilitates access to advanced low-carbon technologies.
- Supports domestic R&D and innovation ecosystems.
- Strategic and Diplomatic Gains
- Strengthens India–Japan climate cooperation.
- Enhances South-South collaboration through knowledge-sharing platforms.
- Positions India as a leader among developing nations in carbon markets.
- Economic and Energy Transition Benefits
- Diversifies India’s energy mix.
- Accelerates decarbonization of hard-to-abate sectors.
- Attracts private investment into green sectors.
- Challenges
- Ensuring environmental integrity and avoiding double counting.
- Building institutional capacity for MRV (Measurement, Reporting, Verification).
- Balancing domestic carbon market development with international transfers.
- Way Forward
- Establish strong carbon accounting frameworks.
- Integrate Article 6 projects with India’s long-term net-zero pathway (2070 target).
- Develop domestic carbon trading market synergy.
- Promote transparency and stakeholder consultation.
UPSC Relevance:
GS 3 – Environment (Climate Change, Carbon Markets), Economy (Green Finance)
GS 2 – International Relations (Climate Diplomacy)