The popular term today in India finds its genesis, dating back to 1989 in America, where an American company called AES Corp financed an agri forest in Guatemala to offset its emissions of coal fired power plant in Connecticut.
The term was given an international recognition with the Kyoto protocol of 1997 whereby developed countries found carbon offsets as a mechanism to reduce carbon footprint and emissions and carbon credits as a motivator. Resultantly, Carbon as a tradeable commodity was recognised in 1997, 2005 and again in 2015 in the Paris agreement.
India recognised carbon as a “good” as late as 2008 and declared trading of carbon credits on multi commodity exchange.
Technically speaking carbon credit refers to any tradable certificate or permit reflecting emissions reductions i.e. to say that when an entity reduces its carbon emissions beyond its set targets, it is required to be rewarded. This tangible form of appreciating the reduction of carbon emissions is carbon credits. Scientifically one carbon credit is equal to 1 tonne of CO2 or other equivalent greenhouse gases.
Inspite of there being no formal recognition and policy, a self conscious effort has been made by many Indian companies and government bodies towards generation of carbon credits and the sale thereof. For instance a Mumbai-based Indian company was the first Indian company to sell 20,000 credit generated from agriculture by running a crop residue management programme and avoiding more than 1,000,000 tonne of CO2 along with other pollutant gases.
The Delhi Metro is also the first metro project registered with UN under CDM in 2007 and has a record of sale of 3.55 million credits generated from 2012 to 2018, earning a revenue of Rs.195 million.
Indore municipal Corporation is the first Indian civil body to earn carbon credits worth Rs 50 lakhs against 1.7 lakh tonnes of CO2 emission.
As per report published in the ETA energy world, it is estimated that from the year 2010 to 2022, India has issued 33.94 million carbon credits and has also traded such carbon credits on international global markets.
However, it is only after the Energy Conservation amendment Bill 2022 that carbon credit has been legitimised by the Indian government.