Assessment of India's Carbon Market Targets

Introduction

The Indian government's recent announcement of greenhouse gas emissions intensity targets for entities in eight heavy industrial sectors is critical in the context of India’s Carbon Credit Trading Scheme (CCTS). These sectors include aluminium, cement, paper and pulp, chlor-alkali, iron and steel, textile, petrochemicals, and petro refineries.

Evaluating Ambition in Carbon Targets

• Ambition should be assessed at an economy-wide level rather than at individual entity or sector levels.
• The Perform, Achieve and Trade (PAT) scheme highlights how energy efficiency varies across entities and sectors.
• Despite mixed results in energy intensity change at the entity and sector levels, there was an overall improvement in energy efficiency.

Carbon Market Insights

• Market mechanisms effectively reduced energy intensity in India’s PAT scheme.
• Overall energy intensity reduction indicates effective market functioning, though does not inherently define the level of ambition.
• Sector-level targets primarily influence financial transactions rather than overall emission intensity decline.

Comparative Analysis of Targets

• Comparisons with historical sector performance are insufficient; future pathways aligned with Nationally Determined Contributions (NDC) are more pertinent.
• Recent modeling suggests a projected annual decline in emissions intensity of 3.44% in the energy sector and 2.53% in manufacturing between 2025 and 2030.

CCTS Targets and Ambition

• The combined average estimated annual decline in EIVA for the eight sectors is 1.68% from 2023-24 to 2026-27.
• Preliminary signs indicate that current CCTS industrial targets may lack ambition compared to other sectors.

Conclusion

In conclusion, while sector-specific targets offer a framework for financial exchanges, true ambition in carbon reduction should be gauged by the aggregate economy-wide decline.