Carbon Credit Price History India

Carbon Credit Price History India

Over the past 20 years, the idea of carbon credits has grown in importance in India as the country attempts to fulfill its climate obligations under international agreements like the Paris Agreement. By giving carbon reduction efforts a monetary value, carbon credits are an essential instrument for lowering greenhouse gas (GHG) emissions. One of the biggest emerging economies with a rising energy demand, India has seen a distinct trajectory in the history of carbon credit prices, influenced by voluntary climate initiatives, global carbon markets, and domestic regulations.

 

 

Comprehending India’s Carbon Credits

One metric ton of carbon dioxide (CO2) or an equivalent greenhouse gas that is either eliminated from the atmosphere or kept from being released is represented as a carbon credit. India takes part in voluntary and compliance-based carbon markets. While voluntary markets enable businesses and people to offset their carbon impact beyond legal limitations, compliance markets are governed by government regulations.

The Kyoto Protocol’s worldwide Clean Development Mechanism (CDM), which ran from 2005 to 2020, is intimately linked to India’s carbon credit history. By putting energy efficiency plans, afforestation projects, or renewable energy projects into action, Indian businesses could receive Certified Emission Reduction (CER) credits under CDM. Due to the international trading of these CERs, a market-driven pricing mechanism was established.

 

Initial Years: 2005–2010

Structured carbon credit trading was first introduced in India between 2005 and 2010. Because of its low-cost abatement opportunities and enormous renewable energy potential, India became one of the top CDM project host nations during these years. Small hydro projects, biomass power plants, and wind energy produced the majority of the carbon credits.

In this early stage, the global CER market had a significant impact on the cost of carbon credits in India. Depending on global demand and the amount of available credits, prices ranged from USD 5 to USD 15 per ton of CO2 equivalent. These credits were mostly sold by Indian projects to purchasers in Europe and Japan who were looking to fulfill their domestic emission reduction commitments.

 

Phase of Consolidation: 2011–2015

The Indian carbon credit market started to level out by 2011 as investors and project developers gained expertise. The National Action Plan on Climate Change (NAPCC) and other domestic climate policies promoted investments in renewable energy and indirectly aided in the creation of carbon credits.

India had a slow drop in carbon credit prices during this time, mostly as a result of the global glut of CERs. Indian project developers faced difficulties as a result of the pricing falling from the previous range of USD 10–15 to about USD 3–7 per ton. With almost 30% of the world’s CER issuance by 2015, India continued to be the biggest host nation for CDM projects in spite of the price decline.

 

Era After Kyoto: 2016–2020

India’s history of carbon credit prices was significantly impacted by the conclusion of the Kyoto Protocol’s first commitment period in 2012 and its subsequent shift to the Paris Agreement framework. Indian project developers were adversely impacted by the notable downturn in the global CER market. Prices continued to decline, occasionally to less than $1 per ton, which reduced the financial appeal of CDM projects.

India maintained its position as a leader in the issuing of carbon credits despite this slowdown by increasing the capacity of renewable energy sources and launching extensive energy efficiency initiatives. In an effort to lessen reliance on foreign buyers of CER, the government also started looking into local carbon markets.

 

2021–2023: The Emerging Market

India started getting ready for a domestic carbon trading system that would be driven by the market after the Paris Agreement went into effect in 2016. The Bureau of Energy Efficiency (BEE) and the Ministry of Environment, Forests, and Climate Change (MoEFCC) sought to bring domestic carbon markets into line with international best practices.

As demand for voluntary carbon credits increased, carbon credit prices in India gradually recovered between 2021 and 2023. Prices in the voluntary market varied from USD 5 to USD 12 per ton, indicating a resurgence of interest in net-zero commitments and corporate sustainability initiatives.

 

Current Patterns and Prospects for 2024

In 2024, the Indian carbon credit market is expected to grow in a positive manner. It is anticipated that the establishment of a domestic carbon market structure will formalize trading, control pricing, and enhance transparency. According to preliminary assessments, the price of carbon credits may stabilize between USD 8 and USD 15 per ton, contingent on customer demand, certification, and project type.

Current pricing are influenced by emerging trends such as:

• Sector diversification: In addition to renewable energy, waste-to-energy, afforestation, and energy efficiency projects are now producing carbon credits.
• Trading platforms built on blockchain technology are enhancing price discovery, cutting transaction costs, and increasing transparency.
• ESG-linked investment boom: Voluntary credit prices are expected to increase as international funds pursue Indian carbon projects.

 

Factors Influencing India’s Carbon Credit Prices

Examining the fundamental elements affecting supply and demand is necessary to comprehend the price history of carbon credits:

• Global carbon market trends: Indian pricing have historically been impacted by demand from other countries, particularly from Europe and Japan.
• Regulatory policies: Supply and price are impacted by domestic programs such as PAT, REC, and potential carbon trading rules.
• Project kind and location: Compared to urban energy efficiency initiatives, renewable energy projects in rural locations typically have lower costs but distinct market values.
• Certification and verification: Credits that have been validated in accordance with globally accepted standards, such as Verra or Gold Standard, frequently command higher pricing.
• Demand for compliance versus voluntary: While compliance markets rely on legal requirements, voluntary markets are more price-sensitive to company ESG objectives.

 

In conclusion: Carbon Credit Price History India

India’s evolution from a major host of CDM projects under Kyoto to a rising force in the voluntary and local carbon markets is reflected in the history of carbon credit prices. The demand for CER internationally, domestic regulations, the use of renewable energy, and business ESG programs have all had a substantial impact on prices. India’s carbon credit market is expected to grow and stabilize as a result of the establishment of a structured domestic carbon trading mechanism and growing corporate commitment to net-zero targets.

To make wise choices about carbon trading, climate finance, and sustainability projects, companies, investors, and legislators must have a solid understanding of this pricing history. India’s carbon credit market has a bright future since it combines financial incentives with environmental responsibilities, which benefits both India and the environment.

 

Carbon Credits Income for MSMEs in India: A Complete Guide to Earning Revenue Through Carbon Markets

Carbon Credits Income for MSMEs in India: A Complete Guide to Earning Revenue Through Carbon Markets