India-Japan Carbon Crediting Mechanism

India-Japan Carbon Crediting Mechanism

Sub : Env

Sec: Climate change

• Objective:
  • India plans to enter into a carbon trading and carbon credit adjustment mechanism with Japan.
  • Joint Crediting Mechanism (JCM) with shared emission-reduction credits.
• Memorandum of Cooperation (MoC):
  • India and Japan plan to sign an MoC to establish the JCM.
  • MoEFCC (Ministry of Environment, Forest and Climate Change) authorized to sign the MoC.
• Carbon Credits Allocation:
  • Carbon credits will be allocated through a structured process.
  • Registry to track these credits.
  • Credits allocated to respective registries of India and Japan.
  • Used towards the Nationally Determined Contribution (NDC) of both countries.
  • Credits can be used for NDCs and international mitigation purposes.
• Economic and Financial Impact:
  • Boost job creation by attracting investments in low-carbon and clean technologies.
  • Financial implications included in project planning.
• Technological Facilitation:
  • Japan to facilitate the transfer of technology, finance, and capacity building.
• Paris Agreement Compliance:
  • JCM formed under Article 6.2 of the Paris Agreement.
  • Implementation according to relevant domestic laws and regulations.
• Joint Committee Responsibilities:
  • Develop rules, guidelines, and procedures for JCM.
  • Cover project cycle procedures, methodologies, design documents, monitoring, and third-party entities designation.
  • Decisions require prior confirmation from both governments unless specified otherwise.
• Emission Reductions Recognition:
  • Credits contribute to the NDCs of both countries while avoiding double counting.

Key Points:

• India and Japan collaborate on a carbon trading and credit adjustment mechanism.
• Joint Crediting Mechanism (JCM) established with shared emission-reduction credits.
• Projects approved by a Joint Committee and credits tracked via a registry.
• Credits allocated to India and Japan’s registries and used for NDCs.
• Boost job creation by attracting investments in low-carbon and clean technologies.
• Japan facilitates the transfer of technology, finance, and capacity building.
• JCM formed under Article 6.2 of the Paris Agreement and follows domestic laws.
• Joint Committee develops rules and guidelines for JCM implementation.

Carbon Credits and Carbon Credit Mechanisms

Purpose of Carbon Credits:

• Carbon Credit: A financial instrument issued to an entity (company or body) for activities that avoid the emission of CO2 or absorb already emitted CO2 (sequestration).
• Permit: Allows the holder to emit a certain amount of CO2 or other greenhouse gases. One credit equals one ton of CO2.
• Mechanism: Devised to reduce greenhouse gas emissions through market-oriented approaches.
• Cap-and-Trade System:
  • Credits Allocation: Companies receive a set number of credits, which decline over time.
  • Trade: Companies can sell excess credits to other companies.
  • Incentive: Encourages companies to reduce emissions as they can profit from selling surplus credits.

History and Development:

• Kyoto Protocol (1997): Created a market for reducing greenhouse gases by assigning monetary value to emission reductions.
  • Clean Development Mechanism (CDM): One of the flexible mechanisms defined by the Kyoto Protocol.
  • Reduction Targets: Signatory countries agreed to specific reduction targets.
  • Carbon Credits Trading: Credits can be sold to governments or companies failing to meet reduction targets.
• Durban Climate Change Conference (2011): Expanded and updated goals from the initial Kyoto Protocol agreement.
• Paris Agreement (2020): Replaced the Kyoto Protocol, continuing the carbon markets.

Mechanisms Under Kyoto Protocol: 

•   Removal Unit (RMU): Based on land use, land-use change, and forestry activities like reforestation.
•   Emission Reduction Unit (ERU): Generated by a joint implementation project.
•   Certified Emission Reduction (CER): From a clean development mechanism project activity.
•   Registry Systems: Track and record transfers and acquisitions of these units.

Internationally Transferred Mitigation Outcomes (ITMO):

• New Mechanism: For international emissions trading between Parties to the Paris Agreement.
  • Article 6(2) of Paris Agreement: Stipulates general rules but details are still to be established.
• Adjustment Mechanism: Ensures only one party takes credit for emission reductions.
• NDC Compliance: Countries can include emission reductions from other countries in their NDC.
• Financial Flexibility:
  • Buyer Country: Can finance lower-cost emissions reductions in another country to meet its own commitment.
  • Seller Country: Can finance domestic mitigation beyond its resources.