The Ministry of Environment, Forest, and Climate Change (MoEFCC) has constituted the National Designated Authority (NDA) to implement Article 6 of the Paris Agreement and establish mechanisms for carbon markets.

It establishes the institutional framework that will oversee the evaluation, approval, authorization, and regulation of projects and emission reduction units under Article 6 of the Paris Agreement, which governs international cooperation through market and non-market mechanisms.

With the coming into force of the Paris Agreement, new mechanisms were established to enable countries to cooperate in achieving their Nationally Determined Contributions (NDCs). These mechanisms encompass both market-based approaches and non-market approaches.

The agreement requires each party to establish an NDA to participate in Article 6 mechanisms and notify the United Nations Framework Convention on Climate Change (UNFCCC) Secretariat of this designation. The present notification fulfills that requirement for India.

Functions and Power of NDA

The NDA will recommend to the government the list of activities that may be considered for trading of emission reduction units, and modify this list according to the Sustainable Development Goals and national priorities.

The authority will evaluate, approve, and authorize projects and activities at various stages of the project cycle, ensuring they comply with international rules, modalities, procedures, and country-specific criteria.

It will also authorize the use of emission reduction units towards India’s NDCs and other international mitigation purposes, apply corresponding adjustments, and communicate such information to the relevant UNFCCC bodies.

The NDA will assess the feasibility and sustainable development contribution of the proposed projects, prioritize them in line with national objectives, and recommend additional requirements if needed.

In cases where multiple proposals compete for the same investment, projects with higher sustainable development benefits will be prioritized. The authority will undertake technical, financial, and sustainable development evaluations, and maintain a registry of approved projects and emission reductions through the Indian carbon market’s administrator.

The NDA will also approve and prescribe fees to be collected and formulate guidelines to utilize these funds. It can establish sub-committees, technical groups, or working groups to support its functions and may invite officials, experts, financial institutions, NGOs, legal experts, and other stakeholders for technical and professional input.

The authority will recommend guidelines for host country project approvals and ensure that implementation is consistent with national principles.

By mandating corresponding adjustments, the notification ensures that environmental integrity is maintained and that emission reductions used abroad are not double-counted against India’s NDCs.

The NDA will also influence the development of the Indian carbon market by maintaining registries of projects and reductions, approving eligible activities, and providing templates and guidance to project proponents.

The prescription of fees and guidelines will create a financial framework for sustaining regulatory oversight. The requirement to prioritize projects with higher sustainable development benefits integrates climate goals with broader national development priorities.

In 2022, the Rajya Sabha approved the Energy Conservation (Amendment) Bill, 2022, paving the way for the establishment of a carbon credit trading market in India. Carbon credits are permits that allow the owner of the credit to emit a certain amount of carbon dioxide or other greenhouse gases (GHGs). One credit allows the emission of one ton of carbon dioxide or the equivalent of other greenhouse gases.

The amended legislation introduced provisions for a legal framework to administer carbon credit trading. It also mandated the minimum share of renewable energy consumption for industrial units or any establishment. The carbon credits would not be available for sale outside the country until the nation’s NDC targets are met.

Last November, the Central Electricity Regulatory Commission released a draft notification outlining new regulations for purchasing and selling Carbon Credit Certificates.