Greenhouse Gas Emission Intensity (GEI) Targets and Indian Carbon Market (ICM)

The introduction of Greenhouse Gas Emission Intensity (GEI) targets is a pivotal development in the Indian Carbon Market (ICM), marking a shift from broad emissions reduction goals to sector-specific performance benchmarks. This shift aligns with India's commitments under the Paris Agreement to reduce emissions intensity by 47% by 2030 and achieve net-zero by 2070, as per the revised Nationally Determined Contributions (NDCs).

Implementation of GEI Targets

GEI targets are sector-specific, aiming at measurable reductions at the plant level. They have been set for approximately 490 industrial units in carbon-intensive sectors, with fiscal year 2024 as the baseline, targeting fiscal years 2026 and 2027 for compliance.

• Cement: 4.7% to 7.6% reduction in GEI, based on product type.
• Pulp & Paper: Up to 15% reduction for some units.
• Aluminium & Chlor-alkali: Moderate reductions tailored for industry-specific realities.

The sectoral variation in targets is intentional, reflecting different abatement potentials and constraints, thus avoiding a uniform approach and ensuring both environmental effectiveness and economic feasibility.

Heterogeneous Abatement Costs and Strategies

GEI targets reveal two important nuances:

• Sectors vary in emissions scale and production processes, e.g., aluminium smelting is electricity-intensive, while cement production involves emissions from limestone calcination.
• Within sectors, abatement costs differ due to technology, fuel mix, and operational efficiencies. For instance, cement and chlor-alkali can achieve reductions through moderate-cost measures like clinker substitution, whereas petrochemicals face challenges tied to core processes.

Factors for Effective GEI Target Implementation

Success in meeting GEI targets depends on:

• Building credible Measurement, Reporting, and Verification (MRV) systems for accurate emissions tracking.
• Integrating MRV with market functioning and addressing cost disparities in emissions reduction across firms.

Future Directions for India

To effectively implement GEI targets:

• Expand coverage to additional sectors like iron and steel with careful planning.
• Create sectoral decarbonisation pathways aligned with technological and investment cycles.
• Strengthen carbon market infrastructure to ensure liquidity, price stability, and transparency.
• Support a just transition through financing, technology transfer, and capacity building, especially for firms with higher abatement costs.

The challenge is ensuring GEI targets operate efficiently and fairly across sectors, transforming from a compliance mechanism into a practical tool for decarbonisation.