National carbon market: India’s roadmap to climate action and transition to net zero

Indian corporates who have committed to SBTi, will be emerging as the direct demand players in the national carbon market framework

natural carbon market India's roadmap

With 92 Indian companies committed to the Science Based Targets Initiative (SBTi), India Inc. is at the forefront to take advantage of the National Carbon Market to combat climate change.

Speaking from the ramparts of Red Fort on the 75th Independence Day, PM Modi has emphasised that by 2030, India’s economy would cut the intensity of greenhouse gas emission by 45 per cent of what it was in 2005.

To accelerate the process of achieving net zero and ongoing changes at policy level by various government bodies, the country is anticipating another reform for the creation of a Local Carbon Market where companies who have set and validated their targets can leverage their early planning toward Net Zero says Prarthana Borah, CDP India, Director.

The draft blueprint of National Carbon Market in India by Bureau of Energy Efficiency (BEE), Ministry of Power (MoP) has included clearly that CDP and Science Based Targets initiative (SBTi) compliant companies are important players in Phase 1 for increasing demand under the Voluntary Carbon Market (VCM).

Also Read: How SMEs can help create a low-carbon economy in India

With an increasing number of corporates setting ambitious targets like SBTs and committing to net zero, the potential of a national carbon market where these companies play a lead role to address climate change is particularly relevant. The focused efforts of these companies to reduce their emissions and use carbon market mechanism to balance the residual emissions can define a coherent initiative that prepares the future India roadmap for combating climate change.

As of July 2022, a total of 92 Indian companies committed to SBTi and 41 companies have their targets approved from SBTi, making the country as the front runner amongst developing economies.

National carbon market

The Science Based Targets initiative (SBTi), a coalition established in 2015 aims to enable companies to set emission reduction targets in line with leading climate science.

It is a collaboration between CDP, the United Nations Global Compact, World Resources Institute and WWF From a sectoral lens, hard-to-abate sectors like textiles, chemicals, and cement are leading from the front in setting targets and can be seen as the initial of the carbon market mechanism as well.

“Economic viability of cement sector depends upon energy cost. SBTi is a value creation tool inspiring leveraging business with low carbon technologies, in turn reducing the overall product cost and increase business’s economic viability,” says Anil Kumar Jain, Assistant Vice President, Corporate Head – Environment and Sustainability, JK Cement Limited.

“Under the SBTi incubation program of CDP, we at JK Cement Ltd. (India) committed to aligning our business model with climate science in FY 2020 with a target to reduce the desired carbon emissions by 2030 with extended support of CDP expert team. The massive initiative of GOI to setup National Carbon Market would be a great opportunity to accelerate the implementation of high-cost technologies economically,” he adds.

Indian corporates who have committed to SBTi, will be emerging as the direct demand players in the national carbon market framework. With a total emission profile of approx. 500 million tons of CO2e, these companies have the potential to take part in the carbon market and with a timeline to reduce their emissions to zero through SBTi Net Zero targets, the expected demand requirements from these companies can be predicted as approximately 4.2 million tons of CO2e on yearly basis.

Also Read: Leather industry should target net-zero carbon footprint: Union minister Jitendra Singh

Dinni Lingaraj, Group Manager, Sustainability, Wipro avers the importance of SBTs. According to him “CDP’s SBTi incubator project has been instrumental in helping companies like us assess their carbon emissions inventory and set ambitious targets. We are pleased to be one of the first 7 companies globally to participate and set SBT aligned Net Zero goals. SBT’s encourage transparency and bring credibility to climate goals and actions and hence can play a key role in informing carbon markets design and development. Science Based Targets (SBT) are critical to inform decarbonization strategies that are based on rigorous climate science – pathways consistent with keeping global warming at below 1.5 degrees by the turn of this century.”

With India’s 2070 net zero commitment that also signifies development goals, sectors like steel, energy utility and infrastructure are placed with the challenge of reducing emissions while meeting the increasing demand of the developing economy. Additionally faced with the challenge of technology transition, a market-based carbon mechanism can be an opportunity to play an active role in climate action.

Anirban Ghosh, Chief Sustainability Officer, Mahindra Group reiterates, “The Science Based Targets provide businesses a decarbonization pathway consistent with the Paris Accord. It gives us a sense that our decarbonisation effort is effective and meaningful. We appreciate the interaction with the SBTi Incubator in setting targets for businesses in the Mahindra Group. The targets enable deep decarbonisation and can be very useful in generating credible credits for a future carbon market.”

Ramnath Vaidyanathan, AVP & Head of Environmental Sustainability, Godrej Industries Pvt Ltd said “We at Godrej Industries welcome this as a timely and absolutely imperative step in the drive towards rapid decarbonization. For companies like us, we will soon reach the ceiling when it comes to intrinsic and operational/strategic avenues for emissions reduction. Beyond this, any improvements on this front will be incremental at best. A dynamic carbon market will enable us to bridge the gap or cover the “last mile” as it were, beyond our SBTi commitments and towards net zero. This will also encourage greater investments in mitigation efforts and sequestration, particularly through nature-based climate solutions.”

Limiting the global temperature rise to 1.5 degrees Celsius will require a rapid, drastic reduction in greenhouse gas emissions. These reductions can be achieved by adopting new technologies, renewable energy, energy efficiency in operating practices, and behavioural change. The Indian corporate sector is at the forefront of tackling the impact of climate change through various innovative technologies and strategies, especially to reduce their emissions.

Also Read: World Environment Day 2022: What Indian SMEs are doing for mother earth

By committing to ambitious initiatives like Science Based Target Initiative, companies have a clearly defined pathway to reduce greenhouse gas (GHG) emissions, help prevent the worst impacts of climate change and future-proof business growth. CDP India’s SBTi incubator handholds companies in their SBTi journey from the commitment through target development and finally target submission.

There has been an exponential rise of 56 per cent in number of companies committing to SBTi since December 2021. This may be seen as a demand opportunity in the carbon market that can help to drive the carbon market mechanism in India. A robust, effective carbon market would make it easier for companies to locate trustworthy sources for carbon transaction which can further motivate climate action and transition to net zero.