India is set to finalize carbon deals with Japan and Singapore

INDIA aims to finalize a potential carbon credit deal with Japan in early 2025 and then accelerate similar negotiations with countries such as South Korea and Singapore

The world’s third-largest carbon dioxide emitter wants to attract investment and technology that can be applied to projects that will cut pollution and generate credits, according to people familiar with the discussions who asked not to be identified because the deliberations are private.

A bilateral agreement with Japan is likely to be signed early next year, and India will seek to conclude pacts with South Korea and Singapore before the end of the fiscal year ending March 2026, one of the people said.

Discussions on potential future agreements are also underway with Germany and Sweden.

A spokesman for India’s Ministry of Environment, Forests and Climate Change did not respond to a request for comment.

The pacts are discussed on the basis of Art. 6 section 2 of the Paris Agreement, which aims to facilitate trade between nations and allow countries to use credits to meet their climate goals. Negotiators at the COP29 talks in Azerbaijan on November 23, after almost ten years of deliberations, approved the principles that will guide the market.

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Japan is in talks with India on a bilateral carbon credit agreement, the Commerce Ministry said, without giving any timeline. Both countries signed an agreement in 2023 to work on building a common lending mechanism.

Singapore is in talks with India on a bilateral implementing agreement under Article 6 section 2, announced the National Secretariat for Climate Change. South Korea’s environment ministry has confirmed discussions on a potential memorandum of understanding on carbon credit cooperation.

The spokesman said that the German Economy Ministry is also in talks with India to agree on a memorandum of understanding. “Sweden is in dialogue with a number of countries” about potential bilateral partnerships, said Ola Westberg, spokeswoman for the Swedish Energy Agency, without specifying whether talks with India were ongoing.

Countries including Singapore and Switzerland entered into pacts before the guidelines were finalized under Art. 6 section 2 during COP29. Agreements between governments to trade emissions reductions have peaked at $1 billion, according to BloombergNEF.

Some experts have raised concerns that bilateral deals could lead to a trade in junk carbon credits that promise emissions reductions on paper but fail to deliver in reality. This is because the regulations are perceived to provide poor guidance on ensuring environmental integrity.

In some talks in India, officials proposed a joint carbon credit mechanism in which partner countries would provide financing and technology to implement projects. The generated loans will then be divided, and the division will vary depending on the investment, the people said.

Officials in India had previously identified 13 activities to be considered for bilateral emissions trading, including green hydrogen, sustainable aviation fuel and high-voltage direct current electricity transmission. BLOOMBERG