How Carbon Credits Can Help Indian Businesses Prepare for a Greener Future

Carbon credits are an important tool for businesses in India to reduce greenhouse gas emissions and combat climate change. Here's how they work and why they are important for the future:

What are carbon credits?

A carbon credit represents the reduction or removal of one metric ton of carbon dioxide or other greenhouse gases. Companies or projects that can reduce emissions below a baseline level can earn carbon credits, which can then be sold to other entities that need to offset their emissions.

How does carbon credit trading work?

There are two main types of carbon credit trading schemes:

1. Compliance-based: The government sets a limit on the amount of emissions allowed per company. If a company exceeds its limit, it must purchase additional credits. This creates an incentive to reduce emissions.
2. Voluntary: Companies voluntarily purchase credits to offset their emissions, often to meet sustainability goals or prepare for future regulations.

India is in the process of launching a domestic carbon market that will include both voluntary and compliance-based elements.

Why are carbon credits important for businesses in India?

1. Prepare for future regulations: India has committed to reducing emissions and achieving net-zero by 2070. The new carbon market will help prepare companies for future carbon taxes and emission limits.
2. Reduce costs: Investing in emissions reduction projects can generate carbon credits that can be sold for profit. This provides a financial incentive for companies to go green.
3. Enhance sustainability: Participating in carbon markets encourages companies to adopt more sustainable practices and technologies, helping to combat climate change.
4. Gain international recognition: India's carbon market will help align the country's climate goals with global standards, potentially opening up new export opportunities.

Challenges and the path forward

While the carbon market presents significant opportunities, there are challenges to overcome, such as ensuring transparency, standardization, and proper alignment with India's climate commitments. Proactive measures and collaboration among stakeholders will be key to the success of India's carbon market in the years to come.