Market size for carbon credits trading is about $300Bn/year.

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Market size for carbon credits trading is about $300Bn/year.

  • Convergence Energy Services (CESL) CEO tells how the company’s LED programme has become particularly important after the COP 26 UN Climate Change Conference held in Glasgow in November 2021, where India made its 2070 net zero announcement.

About global carbon credit market

  • There is not one single market for carbon credits.
  • There are sovereign markets and also the voluntary markets.
  • Private companies have been preferring the voluntary market where prices of carbon credits vary significantly, from as low as 10 cents to $80 as pricing depends on various factors.
  • The market size for carbon credits trading is around $300 billion per year, and this is set to become twice as large.
  • The compliance market, though much larger as of now, is mostly restricted to internal transactions within EU nations.

Carbon Markets under the Paris Agreement

  • The provisions relating to setting up a new carbon market are described in Article 6 of the Paris Agreement.
  • Article 6.2 enables bilateral arrangements for transfer of emissions reductions.
  • Article 6.4 talks about a wider carbon market in which reductions can be bought and sold by anyone.
  • Article 6.8 provides for making ‘non-market approaches’ available to countries to achieve targets.

How are these prices determined

  • Projects such as those which address poverty alleviation and enhance women’s empowerment, tend to fetch higher prices.
  • Projects such as supplying three-wheeler electric vehicles, though they affect people’s lives and impact employments, have no specific guidelines for carbon credits.
  • After Glasgow, along with India’s 2070 net zero announcement, CESL’s LED programme becomes particularly important.

Status of CESL’s LED distribution programme and how does it aim to gain from global carbon market

  • CESL charges Rs 10 for each LED bulb in exchange for an incandescent bulb.
  • The price of the LED bulb they supply is around Rs 85, and there are other expenses of around Rs 15, taking the total cost to Rs 100.
  • They have reached around 15 lakh by now, and the target is to distribute 1 crore LED lights by March.
  • After it is done, the process to issue carbon credits for the programme would begin, and is expected to be completed by July.
  • They are hoping to sell the credits in the market by August, where we are expecting a price of around $3-$3.5 per carbon credit.