Should the pursuit of carbon credit and clean development mechanism set up under UNFCCC be maintained even through there has been a massive slide in the value of carbon credit? Discuss with respect to India's energy needs for economic growth.

In the past years, the prices of carbon credit have taken a huge hit due to reduced demand from the European markets, and introduction of limits/caps on buying of carbon credits by various countries like Australia. Also, countries like Japan, which was a major market for carbon credits, have taken steps to meet their industries’ demand for carbon credits domestically. Additionally, the fact that the talks to extend the commitments made in the Kyoto Protocol have not materialised into any agreement has hurt the market and has dissuaded businesses from opting for clean energy.

India has been a major seller of carbon credits ever since the CDM was put in place. Since the prices crashed, Indian businesses have been holding onto their stockpiles of credits waiting for the demand to go up, leading to a price rise. If India, like China, implements schemes that can domestically soak up the credits that are generated in India, it would boost trade. India’s setting up of carbon emission limits through self-regulation or in consonance with an international treaty, could also boost the domestic carbon trading markets. CDM uniquely combines business interests with clean energy, and promotes usage of clean energy by allowing entrepreneurs to make economic gains from it. Most clean energy comes from renewable sources of energy, so it will be in India’s long-term energy interest to give a boost to CDM, which will indirectly result in large scale usage of renewable energy, thus limiting India’s dependence on oil and other  non-renewable sources of energy.

Topics: GS-III: Infrastructure Energy Sector