As the global community once again converges at the Conference of the Parties (COP), the pivotal role of carbon markets in achieving the Paris Agreement's ambitious goal of limiting warming to 1.5 degrees Celsius takes center stage.
Mitigation strategies should be driven by their ability to bring in technological innovation and mobilize resources for implementation. In the Indian context, existing policies like the ethanol blending mandate lack a market-based perspective, potentially impacting emissions reduction achieved and the living cost of consumers. A carbon market is an essential tool that can address innovation and resource mobilization.
Early in 2022, as part of the Union Budget, the Indian Ministry of Finance announced sovereign green bonds to encourage the growth of the nascent green finance market in the country. In a country where investments in innovation and scaling up and deployment of low-carbon technologies are crucial, this is a positive step. The success and growth of the green finance market will be affected by how carbon pricing is implemented. Some interventions can be less disruptive to the average consumer or more effective at mitigation than others.
