Aim for an efficient carbon market right from the start

India's economy is projected to grow dramatically over the next few decades. In nominal terms, it may double in size by 2030. This is exciting, but it comes with a significant risk.

- HISHAM MUNDOL & MANJUSHA MUKHERJEE

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• India needs a smooth transition from aiming for energy efficiency under its PAT scheme to going for emission reduction under a carbon market. It's crucial that this mechanism functions well.

• Companies should be assured of transparent target setting, credible accreditation and verification, adequate redressal devices and institutional space for systemic course corrections.

Even though India has neither been a historically high carbon emitter nor are its per capita emissions high, if emissions were to increase at the same pace as the economy, it will result in poorer progress than we aspire to. Growth is non-negotiable, but what can and must be negotiated is the link between growth and emissions. An Indian carbon market is essential to this exercise. It will create a mechanism for accountability and incentives, and help raise domestic finance for the national goal of a fast and fair energy transition.

An Indian carbon market would be a carbon-credit trading system for specified units and industries. Emission targets mandated for individual units will initially be based on their prevailing emission profiles (also the technology in use, age, etc.) and will get progressively tighter. As evidence from the EU's carbon market indicates, such credits can generate substantial revenues for companies that invest in green measures and innovate to reduce emissions, as well as for governments.