India to lead $50 bn global carbon credits market by 2030

With India's recent announcement on a roadmap and action plan for the creation and selling of carbon credits in the global market, in compliance with Article 6.2 of the Paris Agreement, the domestic carbon credit market is set to boom in the coming years, say experts.

India is a significant exporter of carbon credits and has issued 278 million credits in the voluntary carbon markets between 2010 and 2022, accounting for 17% of the global supply.

The Taskforce on Scaling Voluntary Carbon Markets (TSVCM), sponsored by the Institute of International Finance (IIF) with knowledge support from McKinsey, estimates that demand for carbon credits could increase by a factor of 15 or more by 2030 and by a factor of up to 100 by 2050.

Overall, the global market for carbon credits could be worth upward of $50 billion in 2030 from the current $2 billion market, experts say.

"Currently, we have done about 200 million credits and another 300 million credits are in the pipeline. Our credits are currently valued about ₹2,100 crore and that value is expected to increase to ₹6,000-₹7,000 crore within a year", says Manish Dabkara, CMD of EKI Energy Services and President of the Carbon Markets Association of India (CMAI).

EKI Energy Services is the largest carbon credits developer among the developing countries and is ranked among the top five globally, and has 3,500 plus customers across 40 countries. Out of the 493 MtCo2e (metric tons of carbon dioxide equivalent - a measurement for carbon pollution) credits generated globally, EKI accounts for 78 MtCo2e and has 15% of the global market share. Debkara says returns from carbon credits are much higher than any financial instruments (upwards of 20%) and EKI advises most of its customers to sell within 6-12 months, in lieu of the global carbon credit market growth.

Globally more companies are aligning themselves with the net zero goals. The number of companies with net-zero pledges doubled from 500 in 2019 to more than 1,000 by 2020. About 2200 global corporations, including some major global corporations, have pledged their net zero goals by the end of 2022. That is going to open up a huge global market for carbon credits from the current $2 billion to $50 billion by 2030. Carbon credits retirements have grown at a CAGR of 35% over the past five years and are expected to at least triple in this decade and India is going to be a leader in generating and selling carbon credits, says Manish.

"Following the implementation of a carbon market in India, we forecast India carbon prices to rise towards $80/mtCO2e by 2050 under our inflection's climate scenario," S&P Global had said in a late January analysis.

The Union Environment Ministry recently came up with a list of priority sectors to attract green investments and these include renewable energy with storage, solar thermal power, off-shore wind, green hydrogen, compressed biogas, emerging mobility solutions like fuel cells, high-end technology for energy efficiency, sustainable aviation fuel, and best available technologies for process improvement in hard-to-abate sectors like aluminium, cement, chloralkali, petrochemicals, thermal power plants and petroleum refineries.

In the Union budget 2023, finance minister Nirmala Sitharaman provided an outlay of ₹35,000 crore to achieve energy transition and net zero objectives and listed green growth among seven priorities of the government. In November 2021, India pledged to achieve net zero carbon emissions by 2070 under the Paris Agreement at the United Nations climate conference COP26 in Glasgow, United Kingdom.