Why India’s Entry into Article 6 Carbon Markets Marks a Turning Point in Climate Finance

The decision to make carbon markets under Article 6 of the Paris Agreement fully operational at COP29 has reshaped the global climate finance landscape. For India, this shift acquired concrete meaning in August 2025, when it signed the Joint Crediting Mechanism (JCM), formally entering the Article 6.2 framework. This move places India at the heart of emerging international carbon market cooperation — not merely as a seller of carbon credits, but as a strategic participant in shaping a low-carbon global economy.

What changed at COP29 under Article 6

At COP29, Parties finalised the operational details of carbon markets under Article 6 (A6) of the Paris Agreement. According to the A6 Implementation Partnership, 89 cooperation arrangements under Article 6.2 are now active across 58 countries, reflecting a sharp acceleration in bilateral and plurilateral carbon market deals.

Equally significant was the adoption of the Paris Agreement Crediting Mechanism under Article 6.4. This marked the formal transition away from the Clean Development Mechanism (CDM) of the Kyoto era to a new system with stricter rules on transparency, environmental integrity, and accounting. Together, these developments transformed Article 6 from a long-negotiated idea into a functioning pillar of global climate finance.

Why India’s participation matters

For a rapidly growing economy like India, participation in A6 mechanisms carries strategic weight. Carbon market cooperation can unlock access to advanced technologies, support domestic research and development, deepen bilateral relationships, and channel climate-aligned finance into critical sectors.

Crucially, the value of Article 6 is not limited to the exchange of carbon credits — known as internationally transferred mitigation outcomes (ITMOs). The deeper opportunity lies in using these mechanisms to accelerate industrial decarbonisation, prepare Indian industries for carbon-constrained global trade, and anchor long-term economic transformation in climate resilience.

The Joint Crediting Mechanism and India–Japan cooperation

India’s entry into Article 6.2 through the Joint Crediting Mechanism with Japan provides an early illustration of how bilateral cooperation can work in practice. The A6 rulebook allows countries to transfer emissions reductions between themselves, provided robust accounting safeguards are in place to prevent double counting.

To operationalise both Article 6.2 and 6.4, India has identified an initial list of 13 eligible activities. These reflect a deliberate balance between development needs and climate ambition, focusing on high-end and emerging technologies capable of shifting India’s long-term emissions trajectory.

Where India is focusing its first Article 6 projects

For the next three years, credit generation will be prioritised in sectors central to India’s energy and industrial transition. These include renewable energy with storage, offshore wind, solar thermal power, green hydrogen, compressed bio-gas, fuel-cell-based mobility, advanced energy efficiency technologies, and sustainable aviation fuel.

This portfolio aligns closely with national priorities. As India continues to rely on coal for power, offshore wind, large-scale storage, and marine energy can diversify the energy mix. Green hydrogen, especially in steel and heavy industry, offers a pathway to sharply reduce emissions intensity. In hard-to-abate sectors such as cement, carbon capture, utilisation, and storage remains one of the few viable routes to deep decarbonisation.

From policy intent to implementation challenges

Translating Article 6 participation into real outcomes now requires institutional follow-through. India has appointed a Designated National Authority for A6, but key operational details remain to be clarified. These include rules for issuing Letters of Authorisation, applying corresponding adjustments, and establishing a predictable legal framework for carbon trading.

Project approvals present another bottleneck. Research by the Council on Energy, Environment and Water shows that voluntary carbon projects in India — particularly in agriculture and land use — can take over 1,600 days to register, compared to under 400 days elsewhere in Asia. For Article 6 projects, which often involve land, communities, and multiple ministries, a single-window clearance system is increasingly seen as essential.

The growing importance of carbon removals

Another opportunity lies in carbon removals. Global demand for high-quality removal credits is rising, and Article 6 offers a platform to build domestic markets for activities such as biochar and enhanced rock weathering. With the right standards and verification systems, India could position itself as a reliable supplier of removal credits, strengthening both climate credibility and export potential.

Why South–South collaboration could be India’s edge

Beyond bilateral deals with advanced economies, India’s Article 6 engagement opens space for deeper South–South cooperation. Shared platforms for technology transfer, capacity building, and blended finance across developing countries could amplify the developmental impact of carbon markets while reducing dependence on fragmented voluntary mechanisms.

India’s first step under Article 6 is therefore more than a technical milestone. It represents an opportunity to integrate climate finance with industrial policy, trade strategy, and diplomatic engagement — positioning the country not just as a participant, but as a rule-shaper in the next phase of global climate cooperation.