Key stakeholders from government, industry, and civil society gathered in Bhopal on Wednesday to explore the transformative potential of carbon markets in Madhya Pradesh.
The event, titled “Strengthening the State of Madhya Pradesh to Leverage Benefits and Opportunities from Carbon Markets,” was organized by the Environmental Planning & Coordination Organisation (EPCO) under the state government’s Environment Department in collaboration with WRI India.
Experts convened to discuss strategies for integrating carbon finance into the state’s climate and development plans.
Climate Actions Gain Economic Viability Through Carbon Markets
Manu Shrivastava, Additional Chief Secretary of the Department of New & Renewable Energy, delivered the keynote address, emphasizing the growing economic viability of climate actions and the pivotal role of carbon markets. He stated: “Climate actions are moving towards greater economic viability, and carbon markets are playing an ever more important role in this transition. Carbon trading is now viable for several sectors in Madhya Pradesh, including solar energy and waste management.”
Shrivastava added, “With advancements in technology, government policy support, assistance from financial institutions, and strong supply chains, more sectors will soon be able to participate in carbon markets. Through capacity-building convenings like this, we aim to learn how to better incorporate carbon markets into our projects. One approach could be assessing project viability during the conceptualization phase. WRI India has been instrumental in supporting the state government in developing such interventions.”
Carbon Markets: A Mechanism for Climate Finance and Emission Reductions
Carbon markets are emerging as a practical mechanism to tackle the dual challenges of climate finance and emission reductions. By enabling the trade of carbon credits—representing one metric ton of CO2 or equivalent greenhouse gases—these markets offer a cost-effective pathway to achieve climate goals.
Global and Domestic Perspectives on Carbon Markets
Policymakers and industry leaders at the event highlighted carbon markets as a critical tool for advancing climate targets while fostering economic growth. Discussions centered on the global status of carbon market architecture, India’s evolving domestic market, and sector-specific opportunities for Madhya Pradesh.
The event began with an overview of the global carbon market framework under Article 6 of the Paris Agreement, which governs carbon market mechanisms. Article 6 includes three components: Article 6.2 allows countries to engage in bilateral and multilateral agreements for trading emission reductions under negotiated terms; Article 6.4 establishes a UN-administered global carbon market to standardize carbon credit trading; and Article 6.8 focuses on non-market cooperation, enabling financial and technical support without trading emissions units.
Insights on Global Carbon Pricing Systems
Subrata Chakrabarty, Associate Program Director at WRI India, provided insights into the global carbon pricing landscape. He said: “About 40% of carbon pricing systems worldwide, including seven carbon taxes and 23 Emissions Trading Schemes (ETSs), allow businesses to use carbon credits to reduce their tax or compliance costs. For example, in Singapore, companies can offset about 5% of their taxable emissions with international carbon credits. Similarly, South Korea, Mexico, and California allow businesses to use a limited number of carbon credits from approved sources to meet their obligations.”
Chakrabarty also highlighted carbon trading initiatives in various countries, noting: “Carbon trading is happening between Ghana and Switzerland for climate-smart rice cultivation, integrated waste recycling and composting, and cookstoves; Thailand and Switzerland for e-buses; and Vanuatu and Switzerland for island electrification through solar energy.”
Opportunities and Challenges for India’s Carbon Market
Addressing India’s domestic carbon market, Varun Agarwal, Program Manager at WRI India, remarked: “Our research indicates India’s carbon market could help reduce an additional 1.3 billion tonnes of carbon dioxide emissions from now until 2030 and cut the cost of emission reduction by 28% compared to a scenario with no market.”
Agarwal added, “However, the success of India’s carbon market will depend on setting ambitious targets in the compliance market—a regulated system where entities trade carbon credits to meet legally mandated emission reduction targets. It will also require maintaining robust additionality criteria in the offset market, which allows organizations to purchase carbon credits to compensate for their emissions by funding projects that reduce or remove greenhouse gases. These measures are essential to avoid an oversupply of carbon credits.”
Madhya Pradesh’s Unique Position in Carbon Market Opportunities
In technical sessions, participants discussed Madhya Pradesh’s unique position to capitalize on carbon market opportunities in sectors such as energy, forestry, industry, and livestock. They emphasized the importance of building technical expertise and institutional capacity to maximize benefits.
Challenges such as compliance with global standards, equitable distribution of carbon revenues, and ensuring transparency in emissions reductions were also deliberated. The convening concluded with a call to action for Madhya Pradesh to position itself as a leader in India’s carbon market landscape.
Call to Action for Madhya Pradesh
Saransh Bajpai, Associate Program Director at WRI India, summarized: “Subnational governments, such as Madhya Pradesh, are uniquely positioned to take the lead in engaging with Article 6 mechanisms. This approach can not only mobilize finance but also demonstrate leadership in climate action. By tackling challenges like capacity building and establishing institutional frameworks, Indian states can fully harness the opportunities provided by carbon markets.”
