The voluntary carbon trading market in India is gaining momentum, even though an official mechanism for accelerating decarbonization has yet to be implemented. However, the influx of carbon certificates from numerous renewable energy projects has caused their prices to drop.
Central to this market are international renewable energy certificates (I-RECs) generated by India’s rapidly expanding clean energy sector. Around twenty-four renewable energy producers are involved in selling the certificates, while buyers include multinational corporations.
“The current domestic carbon credit market is primarily driven by companies purchasing I-RECs to meet their energy transition goals and reduce their scope-2 emissions,” explained Siddhanth Jayaram, Co-founder of Climes, a company assisting firms in tracking and reducing emissions.
Scope-2 emissions refer to the indirect greenhouse gas emissions produced from the electricity consumed by a company, whereas scope-1 emissions are direct emissions from business operations.
One I-REC represents 1 megawatt-hour (MWh) of renewable energy. Buyers can redeem these certificates to account for the mitigated carbon emissions in their emissions tally, helping them achieve their net-zero targets.
In 2023, India issued approximately 7.8 million I-RECs, according to Evident I-REC registry data published by S&P Global in a recent report. The year-on-year growth in issuances remained flat in 2023 after experiencing a 119% increase in 2022.
In addition to I-RECs, virtual power purchase agreements (VPPAs) and carbon avoidance credits have also become popular, Jayaram mentioned. VPPAs are contracts where the power producer supplies an agreed amount of renewable energy to the grid, and the buyer receives green credits for it. Carbon avoidance credits are awarded for business practices that reduce carbon emissions that would have otherwise occurred.
India has become a leading seller of I-RECs due to its increasing renewable energy generation. However, only 4.5 million of the I-RECs issued in India in 2023 were redeemed, resulting in an issuance to redemption ratio of 2.4 to 1, according to Evident data.
As reported by hindustantimes.com, consequently, the prices of India’s hydropower I-RECs dropped by 7.9% month-on-month to around 70 cents (approximately ₹58) at the end of January, according to S&P Global Commodity Insights.
