Is emission trading a possible policy option for India?

Abstract

Domestic actions on climate mitigation are important for countries to undertake in addition to engaging in the international negotiations. An emissions trading scheme (ETS) can be one of the policy tools to promote mitigation actions, but has not yet been implemented in any developing country. An overview is provided of the climate change debate in India, its carbon markets, and proposed government action to tackle climate change. The possibility of implementing an ETS in India is explored from political and institutional perspectives. In particular, an ETS is considered in relation to the existing carbon market in India, particularly the Clean Development Mechanism (CDM), the proposed ‘Perform, Achieve and Trade’ (PAT) scheme and possible Nationally Appropriate Mitigation Actions (NAMAs). Three key design aspects that would be central to the implementation of ETS in India are: point of regulation, GHG emission sources, and choice of allocation method. Their relevance in Indian context and the challenges that the ETS will face in the future are examined, if ETS were to be considered as a possible policy option. Based on this analysis, it is argued that an ETS is not viable for India in the immediate future.