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India’s Ban On The Export Of Carbon Credits – What Are The Implications?

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India’s Ban On The Export Of Carbon Credits – What Are The Implications?

India’s recent ban on the export of carbon credits until the nation reaches its climate goals has sent shockwaves around the carbon market. But – what does this mean in a world where carbon offsetting has become a recognised norm, and the carbon credit market is booming? We reviewed expert opinion and curated the most penetrating analyses:

  • A shrunken carbon credit market: S&P Global spoke to India-based developers who revealed that there is no demand in the domestic market. As a result, India will have an excess of carbon credits that it cannot sell – with millions of revenue opportunity expected to be lost. Without India’s credits in the market, Turkey and China will see more demand. The implications include the carbon credits industry seeking compensation from the Indian government over a loss of revenue, and higher prices – or scarcity – in the voluntary credits market. 
  • India’s prioritisation of its own climate goals could incentivize other countries to do the same: Bloomberg highlights India’s commitment to reaching its climate goals as the factor that fuelled its carbon credit ban, as the country intends to cut its emissions intensity by 45% from 2005 levels. A larger domestic carbon market in India could support a low-carbon future and can accelerate environmental activism in the country. However, the low domestic demand for carbon credits may lead the federal government to introduce carbon finance instruments to stimulate the market. India’s success will determine whether other countries follow suit; Papua New Guinea, Indonesia, and Honduras have already imposed bans on the export of their carbon credits.

 

Our take: India’s unlikely to stop the export of all carbon credits, but heads of sustainability and energy experts should prepare for disruption to the carbon credits market, particularly if more countries develop comprehensive local carbon markets and credits will be absorbed domestically. Prices will likely go up, and insetting projects (credits developed through investments in one’s own infrastructure) will become more attractive.

Maya Hilmi

Analyst

Maya is a Net Zero, Climate Risk Analyst. She is currently specialising in carbon management, ESG regulations, and identifying climate risk solutions. Prior to joining Verdantix, Maya interned at Cardano Advisory where she gained experience in covenant, sustainability, and pensions corporate finance matters. Maya holds a master's degree in Conflict Resolution in Divided Societies with Distinction from King's College London, and an undergraduate degree in International Relations from SOAS, University of London.