BBA.LLB(Hons.

)/Third Semester

Research Paper: Management III

Carbon Credits and Trading in India

Submitted to:
Prof. Rashmi Bendre

School of Law, NMIMS (Deemed to be University)

Submitted by:

Mishri Batavia

Roll number:

D0014

SAP ID:

81022100021

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 Index

Sr. No. Particulars Page Number

1 Abstract
2 Introduction
3 Research Questions
4 Research Objectives
5 Hypothesis
6 Hypothesis based Literature
review
7 Research methodology
8 Discussion
9 Limitations of the study
10 Conclusion
11 References

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 Abstract
Introduction
A carbon credit is defined as a permit or certificate that may be traded and gives the holder
permission to release one tonne of carbon dioxide or an equal amount of another greenhouse gas. A
carbon credit can be thought of as an offset for gas producers. The primary objective of the
development of carbon credits is to lessen the consequences of global warming by curbing
emissions of carbon dioxide and other greenhouse gases from industrial processes and activities.
Being one of the markets with the quickest pace of expansion worldwide, India's carbon market has
already produced almost 30 million carbon credits, the second-highest volume of transactions
worldwide. India's carbon trading industry is expanding more quickly than the country's
biotechnology, computer technology, and BPO industries combined.

Research Questions
1. What are carbon credits and their trading?
2. What is the need for Carbon Trading?
3. What are some examples of carbon trading in India?
4. Is carbon trading beneficial to the Indian economy?

Research Objectives
1. To study carbon credits and their trading.
2. To analyse the need for Carbon Trading.
3. To study some examples of carbon trading in India.
4. To study if carbon trading is beneficial to the Indian economy.

Hypothesis
H0- carbon trading has no effect on the Indian economy.
H1 -carbon trading has a positive effect on the Indian economy.

Hypothesis based Literature review

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1. Zhu, B., Zhang, M., Huang, L., Wang, P., Su, B., & Wei, Y. M. (2020). Exploring the effect
of carbon trading mechanism on China's green development efficiency: a novel integrated
approach. Energy Economics, 85, 104601. The authors of this research suggested a novel
integrated method that incorporates super-efficiency slack-based measures with unwanted
outputs, difference-in Propensity score matching and difference-in-differences are used to
examine how the carbon trading mechanism affects green development. efficiency in regard to
impact method, impact degree, and impact direction. The results demonstrated that, at a
significance level of 5%, the carbon trading system had a considerable impact on the
effectiveness of green development. This shows that the carbon trading system may greatly
increase China's efficiency in green growth, however, the impact is only moderately strong with
a coefficient of 0.0425.
2. Fawcett, T. (2010). Personal carbon trading: A policy ahead of its time?. Energy
policy, 38(11), 6868-6876. This paper examines the existing research, finds knowledge gaps,
and then considers the legitimacy of these worries. Contrary to what the government claims, the
majority of studies demonstrate that PCT is at least as socially acceptable as an alternative
taxing strategy. People believe it may be just as effective as it is fair. PCT will definitely have a
greater startup and ongoing expenditures than other taxing schemes. However, PCT may result
in positive individual and societal transformation that is driven by the policy's non-economic
components. Here, these possible advantages are described. The PCT is a positive and relevant
notion for policy, we conclude.
Research Methodology
Secondary data, such as existing research papers, journals, and articles, were used to conduct the
study for this paper. No primary data was used in writing this research; instead, all of the
information was acquired from the internet.

Discussion

What are carbon credits and their trading?

Companies in the developed world are under pressure from their national governments to reduce
their levels of carbon emissions and fulfil specified benchmarks. However, if these businesses are
unable to meet their emission targets, they do have the choice of buying these carbon credits from
the market, i.e. from someone who has been successful in meeting these targets and who has a

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surplus of these credits. This is an option that is available to them even in the event that they are
unable to meet their emission targets. Trading in carbon is the name given to this practice. Carbon
trading is very beneficial for businesses in poor nations since it enables these businesses to make
monetary profits in exchange for carbon credits, which in turn enables them to upgrade or replace
their technological infrastructure. The evolution of technology will, in the long run, assist
businesses in cutting their carbon emissions.

What is the need for Carbon Trading?

The total number of licences on the market is limited and corresponds to a reduction target.
Emission permits are either given to companies for free at the start of a trading period or must be
purchased at auction. As time goes on, fewer permits become available, which puts pressure on
participating businesses to make investments in cleaner production techniques and lower their CO2
emissions. Long-term, this encourages innovation and lowers the cost of new technology.

Offset credits may be used in conjunction with carbon pricing. Instead of making investments in the
operating nation, the plan is to pay for emission reductions abroad. The most effective technology
may already be in use by a European steel manufacturer, so they decide to invest in a clean
development project in India instead. In emerging or developing economies, where emission
reduction costs are cheaper, the same cash will probably help prevent a greater quantity of carbon.

In practice, we see a mix of all these actions for various jurisdictions and greenhouse gas kinds.
Positive incentives help bring down the price of clean tech alternatives in addition to restricting or
taxing emissions. These may be tax incentives, reductions in tariffs on eco-friendly items, or
subsidies for renewable energy sources.

Governments get income via tax and trade policies, totalling approximately $22 billion in 2016.
These monies may be reinvested in initiatives for sustainable development. In other instances, the
money raised is utilised to cut down on taxes in general.

What are some examples of carbon trading in India?

Jindal Vijaynagar Steel

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Jindal Vijaynagar Steel recently said that during the next 10 years, the company would be ready to
sell conserved carbon worth $225 million. This announcement was made because their steel
production uses the Corex furnace technology, which stops 15 million tonnes of carbon from being
released into the sky.

Handia Forest in Madhya Pradesh

It is anticipated that 95 extremely impoverished rural communities in the state of Madhya Pradesh
would collectively earn at least $ 300,000 per year in carbon payments if they are successful in
replanting 10,000 hectares of communal woods that have been degraded.

Powerguda in Andhra Pradesh

A village in Andhra Pradesh was successful in selling 147 tonnes of credits for the reduction of
carbon dioxide emissions. According to the firm, 147 metric tonnes of carbon dioxide have been
avoided. In order to do this, biodiesel was extracted from 4,500 Pongamia trees located in their
community.

Is carbon trading beneficial to the Indian economy?

In 2013, India was ranked third on the list of countries with the most greenhouse gas (GHG)
emissions. Additionally, India's economy is the third biggest in the world, and it is expected to
become the world's second-largest economy by the year 2027. The INDC submitted by India
outlines a strategy to implement a national emissions trading system in order to bring GHG
emissions under control. The incorporation of carbon pricing demonstrates India's commitment to
taking measures to reduce its impact on the environment. pollution by offering financial incentives
for achieving reductions in the emissions of polluting gases and other pollutants. The signing of the
Paris Agreement by India is another evidence of the country's dedication to combating the effects of
climate change. A market for excess emissions will be created, and firms will be given an incentive
to lower their overall emissions as a result of the system.

Carbon markets may be a crucial motivator for several important sectors like transportation,
agriculture, forestry, waste management, etc. in India's quest to attain its net zero and
decarbonisation targets. India is cutting the emission intensity of several industries significantly, but
it will still depend largely on the carbon market to offset any remaining emissions in order to reach
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net zero. The market for carbon that results from this is thought to be worth at least $50 billion.
Only seven difficult-to-abate sectors—cement, steel, aluminium, power utilities, aviation, vehicle
(passenger cars), oil, and gas—are taken into account in this calculation (refining and extraction).
Additionally, via initiatives related to agriculture, land restoration, and lowering emissions from
deforestation and forest degradation (REDD+), India may attain a carbon market potential of $30 to
$50 billion by 2050 (at a conservative price of $15 per carbon credit).
Countries are creating action plans to use carbon markets to help them fulfil their climate pledges as
a result of the rapidly expanding carbon markets and the dynamic international policy environment.
With the Ministry of Environment, Forest and Climate Change (MoEFCC) and the Ministry of
Power (MoP) creating the necessary legislative, institutional, and technological infrastructures,
India is already actively working to shape the domestic carbon market. Once established, they might
solve concerns with double counting, corresponding adjustments, and the validity and reliability of
carbon credits, particularly in the compliance market.

For India to achieve its net zero goals, the domestic compliance carbon market is essential, but there
is also a sizeable chance to use the voluntary carbon market. We have the potential to be one of the
key hubs for luring international capital pools for voluntary carbon initiatives in the Global South.
For this, a more organised system for the private sector's involvement in voluntary carbon
creditprogrammes is required. Significant social, economic, and environmental advantages might be
unlocked by India taking the initiative to create a framework to support public-private partnerships
and to draw private investment in carbon initiatives via inclusive business models.

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 enery supplied transport residential and commercial buildings

industry agriculture forestry
waste and wastewater

3%

17%
26%

several sectors in which carbon

credits work
14%

13%

19% 8%

• Energy supply:
The most vulnerable industry that gains from carbon credits is the energy industry. Since energy is a
significant contributor to greenhouse gas emissions, offering alternative clean technologies for
energy supply and production may help offset this via carbon credits. Data show that the share
represents 25.90% of all sectors concerned.

• Transport
Another industry that may profit from carbon credits is transportation. The data mentioned above
states that transportation makes up 13.10% of the total.

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 • Residential and commercial buildings

Many different home items, power usage, and other carbon-producing activities occur in these kinds
of buildings. There are several opportunities to use the carbon credit. The evaluation report states
that this category is assigned a weight of 7.90%.

• Industry
Industries occupy the second place in the study, according to the statistics. Several initiatives have
recently been started by the various sectors for the exchange of carbon trading. This sector makes
up 19.4% of the total.

• Agriculture
Governments from different nations are actively interested in this industry, namely agriculture. The
Indian government offers this industry a number of advantages. The evaluation report states that this
sector receives a weighting of 13.50%.

• Forestry
The primary source of greenery in our world is forests. Reforestation is thus the main issue that the
administration has to consider. Plantations of environmentally friendly plants are another approach
to produce carbon credits. The evaluation study states that forestry accounts for 17.40% of the total.

• Waste management
Globally, nowadays waste management is an important sector to reduce carbon emissions. So, there
are lots of opportunities to earn carbon credits in this sector. With the utilization of waste and
wastewater emissions can also earn carbon credits. According to the data, the share is 2.8%.

In India, a number of new businesses are benefiting from the market of carbon credits. Here are a
few of them:

• Gujarat Fluoro-chemicals Limited (GFL)

In essence, the $2 billion INOX Group of Companies includes Gujarat Fluoro-chemicals Limited
(GFL). Industrial gases, refrigerants, chemicals, cryogenic engineering, renewable energy, and
entertainment are just a few of the numerous industries controlled by INOX Group. The

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introduction of the idea of carbon credits to India was pioneered by GFL. The CDM Executive
Board, a body of the United Nations Framework for Climate Change, sought to register its CDM
project as the first project in the world. The biggest CDM player in India and one of the top 5
worldwide was GFL. Gujarat Fluorochemicals Limited (GFL) in India has amassed a considerable
sum of money over the years by selling carbon credits on the international market. GFL reported
sales of around Rs 2,830 crore for the fiscal year 2012–2013, of which carbon credit income was
about Rs 876 crore (31 per cent). Over time, the corporation has seen a decline in its income from
carbon credits.

• SRF Limited
SRF, a multi-business organisation that generates a revenue of $675 million (Rs. 4000 crore),
produces chemical-based industrial intermediates. Technical textiles, fluorochemicals, speciality
chemicals, packaging films, and engineering plastics are all included in its business portfolio.
SRF receives carbon offsets:
As of the right moment, SRF has received a sizable inventory from the UNFCC, which has given
around 7.72 lakh carbon credit units. It has received around 86.5 CERs. The CERs were offered by
SRF at a price of 22 euros each. According to the company's FY11 annual report, carbon credits
brought in Rs 64.17 crore.

• Delhi Metro Rail Corporation (DMRC)

The Delhi Metro Rail Corporation has been recognised by the UN as the First Metro Rail and Rail-
based System in the World to Receive Carbon Credits for Reducing Greenhouse Gas Emissions
because it has assisted in lowering pollution levels in the city by 6.3 lakh tonnes annually, which
helps to combat global warming.

• Jindal Vijaynagar Steel

About 225 million dollars worth of carbon will be available for sale from this group. This is only
achievable with the use of the plant's blast furnace and corex furnace technologies. With the help of
this technology, 15 million tonnes of carbon are kept out of the environment.

• Kalpatru Power Transmission LTD.

At its Rajasthan facility, Kalpatru Power Transmission Ltd. (KPTL) produces power using the
leftovers from the mustard harvest. This is the third project globally and the first Indian initiative to
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get carbon credits from the UN panel as part of the Kyoto Protocol. In this category, the first carbon
credits or certified emission reductions (CERs) ever granted by the Clean Development Mechanism
(CDM) Executive Board. In Honduras, two hydropower projects received these credits. Climate-
friendly, sustainable development initiatives in underdeveloped nations produce CERs. They may
be utilised by developed nation governments and businesses to fulfil their Kyoto Protocol reduction
obligations. They represent one tonne of carbon dioxide equivalent and are tradeable. One of the top
few Indian projects registered by the CDM panel at the UN Framework Convention on Climate
Change was KPTL's Rajasthan project.

Conclusion
Trading carbon credits is a strategy used to lower the number of carbon emissions into the
environment. Today, most firms use this idea and get various advantages, but they also encounter
certain difficulties. According to the aforementioned study, several economic sectors, including
energy supply, transportation, infrastructure, manufacturing industries, agriculture, forestry, waste
management, etc. are directly engaged in the trade of carbon credits. The trade of carbon credits has
benefited several businesses, including Gujarat Fluoro-chemicals Limited (GFL), SRF Limited,
Delhi MetroRail Corporation (DMRC), Jindal Vijaynagar Steel, and Kalpatru Power Transmission
Ltd. The data mentioned above also demonstrates that most organisations are interested in
exchanging carbon credits. The primary gain for businesses, beyond financial gain, is an increase in
market share and social standing. From a national standpoint, the country gains when the number of
atmospheric carbon emissions decreases. This is the main advantage that comes from the trade of
carbon credits. If we breathe fresh air, many issues will instantly be addressed.

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