In the wake of global climate change concerns, the pursuit of carbon credits and clean development mechanisms (CDM) established under the United Nations Framework Convention on Climate Change (UNFCCC) has been a cornerstone in the endeavor to mitigate greenhouse gas emissions. However, the recent substantial decline in the value of carbon credits raises pertinent questions about the efficacy and sustainability of this approach. Despite this downturn, it remains imperative to deliberate on whether the pursuit of carbon credits and CDM should be upheld, particularly concerning India’s energy needs for economic growth. India, as one of the world’s fastest-growing economies, faces a dual challenge: addressing its burgeoning energy demands to fuel economic development while simultaneously mitigating its environmental impact. The country’s reliance on fossil fuels, particularly coal, for energy production underscores the urgency for transitioning to cleaner and more sustainable alternatives. In this context, the continuation of carbon credits and CDM mechanisms could offer a vital avenue for incentivizing and financing renewable energy projects and other carbon mitigation efforts in India. However, the decline in the value of carbon credits necessitates a reassessment of their effectiveness in driving meaningful change. Moreover, the discrepancy between the cost of implementing renewable energy projects and the returns from carbon credits poses a significant obstacle. Therefore, while maintaining the pursuit of carbon credits and CDM may offer benefits in terms of addressing India’s energy needs and promoting sustainable development, it requires careful consideration and potential recalibration to ensure alignment with the country’s evolving economic and environmental objectives.
Tag: Conservation, environmental pollution and degradation, environmental impact assessment.
Decoding the Question:
- In intro try to define carbon credits and also in brief write about clean development mechanism.
- In Body,
- Discuss reasons for reduced value of carbon credits.
- In the second part, justify whether India should pursue for carbon credits or fulfil domestic energy demand. (Balanced answer needed, write need of energy for India, and also need of carbon credits)
- Try to conclude the answer with a balanced opinion.
Answer:
India is a rapidly growing economy with vast portions still under-developed. This requires a huge amount of energy which would eventually require carbon emissions that would make achieving the Nationally determined contributions(NDCs), set under the Paris agreement, extremely difficult. In this context the carbon credits can be used to offset the NDC requirements.
Carbon Credits are Carbon Emission reduction Certificates which can be traded on Emissions Trading Systems (ETS) or cap-and-trade systems. Any public or private unit which saves carbon emissions beyond the total cap provided on that industry receives carbon credits. For example, Delhi Metro earned ₹19.5 crore from the sale of carbon credits; Over 3 million such credits collected from 2012-2018.
Reasons for the decline in the value of carbon credits:
- Fallen demand in the European market: There has been decreasing demand in European countries for carbon credit which leads to a massive price decrease of carbon credit.
- Domestic market: Countries like Canada, China, Brazil, have set up independent carbon markets they can trade in, without the prices being influenced by global circumstances. This led to a fall in prices of global carbon credit.
- Restrictions of purchase: European countries and countries like Australia have put restrictions and put a cap on purchase of carbon credits from developing countries like India.
- No commitment under Kyoto Protocol: The talks to extend the commitment made under Kyoto Protocol have not materialised into any agreement. This has hurt business sentiments and dissuaded businesses from opting for a clean energy mechanism.
Advantages of using carbon credits to fulfill NDCs:
- Tackling the power crisis & Poverty: India can continue using cheaper coal to power its industry for a longer time.
- Import substitution: Coal is produced domestically whereas for now Photovoltaic chips and semiconductors are imported.
- Cheaper rates of Carbon credits: European Union which has been the largest market for CDM credits, has declined sharply over the last decade because of regulatory barriers. Thus India can utilize them for cheap.
Disadvantages of not using carbon credits to achieve NDCs:
- Improving investments into India: India registered 1,703 projects under the CDM which is the second highest in the world. Total carbon credits issued for these projects are around 255 million which corresponds to an overall anticipated inflow of approximately U.S.$2.55 billion in the country at a conservative price of U.S.$10 per CER.
- Persuades the corporates for technology development/transfer: Hosting entities benefited from technology transfer.
- Encourages reduction of emission: Indian government and the corporates would themselves be pushed to achieve mechanisms that would provide them long term sustainability.
- Benefits for the planet: CDM option not only economically advantageous but also move for overall development
- India can profit out of other countries’ inability to achieve their NDCs: It is the developed countries that would rely more on market mechanisms for achieving their climate targets as they would be comparatively low-cost options.
Should India pursue for carbon credits and CDM:
- Demand of Energy: Due to increasing demand for energy, India has put a lot of emphasis on improving energy efficiency. The continued pursuit for carbon credit will be very negative for India’s energy sector and this can compromise India’s energy needs.
- Manufacturing Hub: India’s quest for carbon credits can be harmful to make India a manufacturing hub and improve quality of life. As carbon credit may prove detrimental for growth in the energy sector and even harms newer investments.
- Huge Population: India can not depend on clean energy completely for fulfilling its energy needs. As India have huge population and going to become number one in terms of population size and to achieve Sustainable Development Goals India ned huge investments in the energy sector.
- Use for Own Benefit: Indians need to use surplus carbon credit for its own benefits by selling it domestically. It will achieve twin objectives of fulfilling generation of energy especially from coals and fossil fuel-based energy and keeping carbon footprints low.
But if India completely abandons the carbon credit policy it could face backlash from the international community on the issue of climate change. Hence instead of completely abandoning carbon credit policy India needs to moderate it policy as per global demand and domestic energy demands.
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