Context:
COP29 taking place in Baku, Azerbaijan, has been labeled the “Climate Finance COP“ for facilitating negotiations on key aspects of Article 6 of the Paris Agreement.
Key Highlights:
- Article 6.2 allows the transfer across borders of Internationally Transferred Mitigation Outcomes (ITMOS) in layman’s terms, carbon credits for the purposes of meeting Nationally Determined Contributions (NDCs).
- Thus, the system benefits the developing countries by bringing in investments, fostering technology transfer, and supporting emission reductions.
Why Article 6.2 Is Important for India?
- India, now recognized as the world’s third largest GHG emitter, is indeed afflicted by the question of how to sustain growth while complying with climate obligations.
- Among its aims in combating climate change is 45% reduction in emissions intensity by 2030, whereas finance and technology gaps are significant hurdles.
- Prior to COP29, India pressed the developed countries to mobilize $1 trillion per year as climate finance for the transition of developing countries to low carbon economies.
India’s Carbon Trading and the Market Readiness
- India has already set the path for international carbon trading:
- Carbon Credit Trading Scheme (CCTS) (being operational since 2023) aims for a transparent carbon market.
- With experiences from Renewable Energy Certificates (REC), Energy Saving Certificates (ESCerts), and the Clean Development Mechanism (CDM), India is well capable of ITMO transactions.
- Main sectors likely to cooperate in ITMOs:
- Renewable energy, energy storage, green hydrogen, carbon capture, and sustainable aviation fuel.
- Agreements with South Korea, Japan, and the EU will bring in top notch technology and investment.
India’s Leadership Potential in South-South Partnership with Africa
- Besides the conventional North South funding arrangements, India is quite positioned to take a lead in the South South partnership particularly with African nations.
- Why Africa?
- Huge renewable energy potential with little resources to conduct large scale projects.
- Severe climate vulnerabilities in agriculture and water security.
- India has already established quite strong trade and development ties with Africa, thus collaboration can be easy.
- Mutual benefits are incremented
- Africa gets financing, technology, and expertise to pave the way for a sustainable future.
- In turn, India gets to expand its carbon market footprint and exert its leadership in clean energy globally.
Risks & Challenges for India
- Developed countries may try to pass the climate burden to India
- Instead of conservation efforts to reduce emissions, they may just buy cheap ITMOs from India and delay their transitions.
- India also might be in danger of selling too many credits, which in turn may hold its own progress in question with the deliberation upon climate goals.
- The need now arises for transparency and equitable credit sharing:
- In the absence of an efficient governance framework with clearly articulated rules and oversight, the ITMO trading may effectively turn out to be either inefficient or even exploitative.
- India should negotiate fair benefit sharing agreements and side step loopholes that would unjustly counteract its own sustainability goals.
The Way Forward
- Article 6.2 represents a land mine of opportunity for India as it enables unlocking climate finance, building green infrastructure, and creating international cooperation.
- But careful governance, fair allocation of credits, and strategic partnerships will ensure that India reaps the benefits without compromising its wider long term climate goals.
