Abstract:

India is developing a national carbon market to reduce greenhouse gas emissions. An ambitious and well-designed carbon market can encourage cost-efficient, low-carbon transformation of the Indian industry, while unlocking financing and technology transfer opportunities for micro, small, and medium enterprises. A carbon market, however, is complex to implement and can involve significant transaction costs. Poor design can also lead to inequity, inefficiency, loss of competitiveness, carbon leakage, and a lack of compliance. This report provides design and implementation recommendations for an effective carbon market in India. These findings draw from international carbon markets and India’s experience with market-based mechanisms, brought together with practical insights and industry feedback from a carbon market simulation.