India Takes Green Leap: Sets Sights on Carbon Reduction Targets for Key Sectors

In a significant stride toward fulfilling its climate goals, India has unveiled a groundbreaking plan to establish carbon emission reduction targets for four pivotal sectors heavily reliant on fossil fuels. These sectors, which include petrochemicals, iron and steel, cement, and pulp and paper, are set to undergo a transformative shift in their emissions practices.

Aligning Industry with Greenhouse Emission Targets

India's ambitious initiative aims to align the nation's industrial sector with its broader greenhouse emissions reduction target, as reported by Reuters. The plan will see the government establish carbon emission intensity benchmarks and reduction targets for these sectors over the next three years.

Crucially, this will pave the way for an annual market trading cycle, allowing companies to buy and sell carbon credits to meet their respective goals.

Incentives for Meeting and Exceeding Targets

Companies that surpass their emission reduction targets will earn valuable carbon credits, which can then be sold to firms struggling to meet their goals. A top government official was quoted in the media as saying, "The mandates will be applicable from 2024-25, and the carbon trade will commence in 2025-26." These targets will closely align with the emission intensity reduction goals that India has submitted to the United Nations.

Ambitious Climate Commitments

India has made resolute commitments to combat climate change. These commitments include reducing its greenhouse emissions to 45% of its 2005 levels in relation to its gross domestic product by 2030, and ultimately achieving net-zero emissions by 2070.

The introduction of carbon credits is a pivotal step in this journey and will be facilitated by the proposed Indian carbon market, a provision that received legislative approval from the Indian Parliament in December of the previous year.

A Unique Approach to Carbon Markets

India's proposed carbon market stands apart from those in developed countries. Instead of setting emissions limits and allocating tradable permits or credits to emitter industries, a committee comprising key ministries such as environment, power, and renewable energy is taking charge of establishing emission reduction targets for each sector within India.

The eagerly awaited rules and targets for these industries are expected to be announced before December. India already possesses a market for trading certificates in above-target energy savings for entities in 13 sectors, indicating a growing commitment to sustainability.

Industry-Government Collaboration

In October, a consortium of green energy companies, including Adani Green, Hero Future Energies, Ayana Renewable Power, and global private equity leader KKR's Virescent Infra, joined forces to mediate between the government and industry. This collaborative effort underscores the growing awareness of the urgent need to address climate change.

India's bold move towards establishing carbon emission reduction targets for key industrial sectors is a resounding testament to its commitment to combat climate change and pave the way for a more sustainable future. With ambitious goals and a unique approach to carbon markets, India is poised to make a significant impact on global efforts to mitigate the effects of climate change. The world will be watching as these transformative changes unfold in the coming years.