Failure at Madrid, a setback for Indian renewable energy

The climate talks at COP25 not evolving rules for carbon trading is an opportunity lost. An estimated 4 billion CERs, over 300 million of which belong to Indian companies, await buyers.

- M Ramesh

The failure of the COP25 climate talks in Madrid to frame rules for evolving a market for trading in carbon credits is a bit of a setback for the Indian renewable energy industry — even if it is true that expectations were not great to start with.

A proper framework for emissions trading, particularly as envisaged under Article 6.4 of the Paris Agreement — which essentially gives the private sector a play in the carbon markets — could help wind, solar, biomass and hydro energy companies in India (and elsewhere) pick up some money by selling offthe credit for saving carbon dioxide emissions.

By undergirding the economics of renewable energy projects, a vibrant carbon market system could provide some pep to the industry, while at the same time fighting global warming.

So the world will have to wait for at least a year more, hoping that when they all meet at Glasgow in December 2020, something will be worked out.

Given that most countries believe that carbon markets are an important element of fighting climate change, it appears inevitable that the rules for carbon trading will be established sooner or later. A positive development is, 31 countries led by Costa Rica have signed up for a set of principles to maintain the integrity of carbon markets. Known as ‘San Jose principles’, after the Costa Rican city in which they were first mooted, these principles are of little practical value but they help keep the spark alive. In sum, while the establishment of a framework for trading in saved emissions has slipped on time, and to that extent it is a setback for the Indian renewable energy industry, there is still hope for the medium and long term.

But what are carbon markets and why is a consensus on the rules for them so complex?