Indian Carbon Market and JCM Implementation in India

Overview of the India Carbon Market

India has yet to introduce its own carbon market, known as the Carbon Credit Trading Scheme (CCTS). This scheme is created to lower greenhouse gas emissions through carbon pricing. It is divided into two types: a compliance mechanism for obligated entities (mainly industrial sectors) and an offset mechanism for voluntary participation. Its goal is to motivate and assist entities in decarbonizing the Indian economy. CCTS established the institutional framework for the Indian carbon market (ICM), laying the groundwork. It is designed as a Cap-and-Trade system, like the EU ETS.

Types of Mechanisms

Compliance Mechanism

Sectors included under this are classified as obligated sectors. There are eight sectors listed as obligated entities: Iron & Steel, Cement, Pulp & Paper, Petrochemicals, Aluminium, Refinery, Textile, and Chlor-Alkali. These sectors will have free allowances to emit (Cap). The entities that emit less than the cap can sell the surplus, while those that emit more than the cap must buy allowances to compensate for the excess emissions; if they fail to do so, they will be required to pay the penalty. 

Offset Mechanism

Sectors included under this classification are the voluntary sectors, which encompass Energy, Industries, Agriculture, Waste handling and disposal, Forestry, Fugitive emissions, Construction, Solvent use, CCUS, and Transport. They can purchase credits to strengthen their reputation and attract investors, thereby enhancing brand image and credibility. 

Timeline of CCTS

Objective of JCM Agreement

• Facilitates the low-carbon Japanese technology in India

• Financial support for green projects and infrastructure

• Improves the domestic capacity in advanced climate technologies

• Enable India to share credits (ITMOs) under Article 6.2 with Japan

• Strengthen India's progress towards Net Zero and its NDC

• Boost the employment rate

Background of the Agreement

The Joint Credit Mechanism (JCM) was signed between India’s Ministry of Forests, Environment, and Climate Change and the Government of Japan. This bilateral agreement, valued at nearly 6 trillion INR (~10 trillion JPY), covers sectors including defence, semiconductors, AI, and critical minerals. It further supports India’s ambition to emerge as a manufacturing hub with a strong focus on clean energy. Only Japanese companies can avail financial support for a feasibility study directly from JCM; however, Indian companies can also collaborate with them. 

Eligibility Criteria under JCM

• The project technology should be new in India

• If the technology already exists, it should be costlier to implement.

Eligible Activities under JCM

The Project should be any one of the following activities: Solar thermal power plants, Offshore wind projects, Green hydrogen production, compressed bio-gas projects, emerging mobility technologies, High-end energy efficiency technologies, Sustainable aviation fuel (SAF), Best available industrial technologies for hard-to-abate technologies, Ocean energy, High Voltage Direct Current transmission for renewables integration, Green ammonia, CCUS. 

Financial Streams of JCM Projects

JCM opens multiple financial channels:

• Carbon Credit Revenues: Generate ITMOs, which can be shared between partner countries

• Foreign Investment: International investment in Indian carbon projects

• Technology localisation: domestic production increases, potentially reducing import costs.

• Public-Private partnership: Especially in the aviation industry.

JCM Project Cycle

Unlike CDM, JCM has an initial step of the project, the Idea Submission Process, to ensure the feasibility of the project under JCM before implementation.

Status of India's engagement under Article 6

Detailed procedures for implementing projects under the JCM are expected to be completed by December 2025. Negotiations are ongoing with Singapore, Sweden and South Korea for the signing of bilateral agreements under Article 6 of the Paris Agreement. 

Challenges

Although the agreement can help both countries advance their NDCs and foster green projects, it still encounters several challenges along the way. The primary problem is about double-counting, where both countries may claim the same emission reductions.  

Long-term sustainability is another vital concern. i.e., Besides funding, India should develop the capacity to operate that technology on its own through knowledge transfer, training, and Infrastructure development. 

Conclusion

India’s Carbon Credit Trading Scheme (CCTS), along with the upcoming Joint Crediting Mechanism (JCM), represents a significant step toward establishing a credible and internationally compatible carbon market. By integrating a domestic compliance system with international cooperation under Article 6, India is laying a solid foundation for investment and market confidence. 

As implementation progresses, India has the potential to emerge as a regional leader in carbon trading, mobilizing climate finance and accelerating decarbonization across key sectors. Mt. Stonegate is well-positioned to support stakeholders in navigating these opportunities and converting policy momentum into measurable climate and investment outcomes

References:

1. https://www.sustainablefutures.org/publication/the-indian-carbon-market-institutional-regulatory-and-market-considerations-2/

2. https://www.insightsonindia.com/2025/08/30/joint-crediting-mechanism-jcm/

3. https://www.usthadian.com/india-japan-joint-credit-mechanism-for-climate-action/

4. https://pwonlyias.com/current-affairs/india-to-enter-into-carbon-crediting-mechanism/

5. https://anaxee.com/india-article-6-2-carbon-trading-japan/

6. https://beeindia.gov.in/carbon-market.php