India is developing a national carbon market that combines mandatory compliance for high-emission industries with a voluntary carbon credit system. The objective is to reduce emissions while safeguarding trade competitiveness, particularly as global policies such as the EU’s carbon border tax gain momentum. By aligning its framework with international standards, India aims to ensure its carbon credits are globally acceptable and supportive of its long-term net-zero target.
At the global level, India’s approach draws lessons from earlier carbon market mechanisms while seeking broader sectoral coverage and stronger governance structures. Ongoing negotiations under the Paris Agreement are also influencing rules for cross-border carbon trading, shaping how national markets interact internationally.
Key challenges remain around transparency, robust monitoring and verification, and institutional capacity. However, if these issues are addressed effectively, India’s carbon market model could serve as a blueprint for other Global South countries seeking to balance climate ambition with economic development.
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