Carbon Credit-Driven Green Financing Crucial For Reducing Emission Levels

The challenges include complex and uncertain regulatory frameworks, bottle-necks in establishing robust measurement, reporting, and verification (MRV) systems for carbon accounting, lack of standardisation and transparency in carbon credit ac-counting

India has committed to the Nationally Determined Contribution (NDC), which means reducing emission intensity of the GDP by 45 per cent from the 2005 levels, thereby achieving 50 per cent cumulative energy power installed capacity from non-fossil fuel-based energy resources.

It also includes creating a carbon sink of 2.5 to 3 GtCO2e through additional forest and tree cover. Further the country is planning to achieve net-zero by 2070.

Therefore, establishing a robust carbon pricing and accounting framework is essential for India. Trading carbon credits in voluntary or compliance markets creates an addi-tional revenue stream, enhancing the project's appeal to both foreign and domestic in-vestors.

This ‘financial additionality’ is critical to make the decarbonization technology com-mercially viable in a short span.

India has opportunities such as unlock additional revenue for green projects through carbon credit trading, facilitate green financing for SMEs, OEMs, and projects, and en-courage SMEs and businesses to develop net-zero and sustainability plans.

The challenges include complex and uncertain regulatory frameworks, bottlenecks in establishing robust measurement, reporting, and verification (MRV) systems for car-bon accounting, lack of standardisation and transparency in carbon credit accounting, and uncertainty in defining a standardised carbon pricing framework.

Talking to Bizz Buzz, Khushal Tipre, Head (Green technology and projects), Ecofy says, “The sale of carbon credits can significantly reduce the cost of capital for renewable en-ergy projects. By earning carbon credits, developers can secure additional financing, making renewable energy projects more attractive to investors.”

This is particularly beneficial for large-scale projects that require significant initial in-vestments but offer long-term sustainability and profitability. Green financing through carbon credits reduces the payback period and enhances the economic viability of such projects, he said.

Although this is an opportunity in itself, there is a lack of clarity in the country as re-gards utilization of carbon credits and the ability to generate finance.

However, into the future carbon credits will help project developers to draw invest-ment and guarantee funding for renewable energy projects, afforestation programs, and sustainable agriculture practices by rewarding carbon reduction and emission avoid-ance.

Shailendra Singh Rao, founder of Creduce, says, “India's ambitious climate targets and great renewable energy potential appeal to carbon credit projects. Generating and sell-ing carbon credits will help project developers offset their carbon emissions or sell them to carbon-intensive businesses, so creating other income sources. Projects now empowered by this financial boost can scale up, apply cutting-edge technologies, and generate sustainable employment.”

Moreover, carbon credits might inspire private sector funding for environmentally friendly initiatives. Carbon credits draw domestic and foreign investors to help the green development agenda by offering a clear financial return. This flood of money can expedite adoption of renewable energy sources, improve energy efficiency and advance environ-friendly land use methods, he said.

Green financing via carbon credits is likely to be very important in reaching climate targets and creating a sustainable future as it keeps strengthening its carbon market framework.