Challenges and Safeguards in India’s Carbon Market
18.10.2025
Challenges and Safeguards in India’s Carbon Market
Context
As India advances toward its net-zero emission target by 2070, the creation of a structured carbon market has emerged as a key instrument to balance economic growth, environmental protection, and social justice. However, global experiences, particularly from Africa, highlight that poorly regulated carbon markets can deepen inequalities and marginalize local communities.
About the Carbon Market
A carbon market sets limits on greenhouse gas emissions and enables trading of carbon credits—each representing the removal or avoidance of one ton of carbon dioxide (CO₂).
- Entities emitting less than their allocated limit can sell surplus credits.
- Those exceeding limits must purchase credits to offset excess emissions.
- Credits are generated through green projects such as afforestation, renewable energy, or sustainable agriculture.
The Carbon Credit Trading Scheme (CCTS), launched by the Ministry of Power, seeks to build a domestic carbon trading ecosystem to support low-carbon industrial transformation and attract climate finance.
Structural Challenges and Risks
Global precedents, notably from Kenya, reveal several pitfalls that India must avoid while expanding its carbon market.
Large corporations often acquire vast land tracts for renewable or offset projects, generating credits while continuing pollution in other sectors. This undermines genuine emission reduction.
2. Land and Livelihood Conflicts
Common and community lands—especially those belonging to tribal and pastoral groups—are converted for carbon projects, leading to loss of access and displacement.
Many projects proceed without Free, Prior, and Informed Consent (FPIC) from affected populations, excluding them from key decisions over land and resource use.
Profits from credit sales often remain with corporations, with minimal compensation or reinvestment in local communities that host these projects.
5. Lack of Transparency and Oversight
Monitoring loopholes, opaque benefit calculations, and limited disclosure of project data make it difficult to hold polluters accountable.
The agriculture sector, a major emission source, lacks institutional support and awareness to participate effectively in carbon credit generation.
Safeguards and Way Forward
1. Protecting Community Rights
Ensure FPIC and legal safeguards for tribal and rural populations before project approval, preventing land alienation and exploitation.
2. Just and Inclusive Climate Action
Climate strategies must integrate equity and social justice, ensuring vulnerable groups are not sacrificed for carbon offset targets.
Establish mechanisms for revenue-sharing with local communities from projects executed on their land.
A neutral oversight body should audit projects, ensure transparency, and address grievances beyond the courts.
Regulations must align economic development, environmental responsibility, and human rights, fostering both growth and justice.
Conclusion
India’s carbon market holds transformative potential but must avoid reproducing global inequities. A just, inclusive, and transparent framework, rooted in community consent, accountability, and equitable benefit distribution, will ensure that climate action strengthens both sustainability and social justice.