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The Paris Agreement, carbon markets and India's climate action

Climate change · Part 3 / 3 · Fact-checked on · how we check

Written with AI from the sources listed at the bottom of this page, then fact-checked by a separate AI.

The Paris Agreement's goals, nationally determined contributions, the transparency framework and the global stocktake; India's NDC and net zero 2070; Article 6 carbon markets; India's Carbon Credit Trading Scheme and Green Credit Programme; climate finance and the loss and damage fund; the NAPCC and its eight missions; India-led alliances.

Part 2 ended with negotiators giving up on targets handed down to countries on a 1992 list. This part shows what replaced that approach: the Paris Agreement of 2015, under which every country, rich or poor, writes its own pledge, the nationally determined contribution, and the world checks every five years whether the pledges add up. It then turns to the money and the markets that support those pledges, and finally to India: its targets, its own carbon trading scheme, its national plan of 2008 and the international groups it has launched.

The Paris Agreement was adopted at COP21 in Paris on 12 December 2015 and entered into force on 4 November 2016, once at least 55 parties accounting for at least 55 per cent of global emissions had joined; India ratified it on 2 October 2016, Gandhi Jayanti. Article 2 sets three aims. The first is to hold the rise in global average temperature to well below 2 °C above pre-industrial levels while pursuing efforts to limit it to 1.5 °C. The second is to strengthen the ability to adapt to climate impacts in a way that does not threaten food production. The third is to make flows of finance consistent with low-emission, climate-resilient development. Article 4 adds a long-term aim: global emissions should peak as soon as possible, and in the second half of this century the gases people release should be balanced by what sinks remove. The Conference of the Parties of the UNFCCC also serves as the meeting of the Agreement's parties.

The engine of the Agreement is the nationally determined contribution under Article 4. Each party must prepare, communicate and maintain successive contributions, pursue domestic measures aimed at meeting them, and submit a new one every five years; each new contribution is expected to go further than the last. The legal duty is about process: a country is bound to make, report and update a pledge, but not to achieve the number written in it. This is the reverse of the Kyoto Protocol, whose targets were binding but applied only to listed countries. The principle of common but differentiated responsibilities survives with an added phrase, 'in the light of different national circumstances'.

Pledges made separately need a way to be checked and added up. Article 13 sets up an enhanced transparency framework: every party reports its emissions and its progress under a common set of rules, and expert teams review the reports. Article 14 creates the global stocktake, a collective review held every five years to judge how far the world remains from the Agreement's goals; it does not grade individual countries, but its findings are meant to shape the next round of contributions. The first stocktake concluded at COP28 in Dubai in December 2023. Its decision called on parties to contribute to tripling renewable energy capacity and doubling the rate of energy-efficiency improvement by 2030, and to transition away from fossil fuels in energy systems in a just, orderly and equitable manner. A compliance committee under Article 15 works in a facilitative way and imposes no penalties.

India's first contribution, submitted in October 2015, promised to cut the emissions intensity of its GDP by 33–35 per cent below the 2005 level by 2030, to raise non-fossil sources to about 40 per cent of installed electricity capacity, and to create an additional carbon sink of 2.5–3 billion tonnes of carbon dioxide equivalent through more forest and tree cover. At COP26 in Glasgow in November 2021 the Prime Minister announced a five-point agenda, the 'Panchamrit', which included net zero emissions by 2070. The updated nationally determined contribution, approved by the Union Cabinet in August 2022, raised the intensity cut to 45 per cent and the non-fossil share of installed capacity to about 50 per cent by 2030, kept the forest-sink goal, and added a mass movement for sustainable lifestyles, Mission LiFE. Intensity means emissions per unit of GDP, so total emissions can still grow. The Ministry of New and Renewable Energy reported in July 2025 that non-fossil sources had crossed half of installed capacity.

Article 6 lets countries cooperate to meet their contributions. Under Article 6.2, two countries can agree that one transfers emission cuts to the other; these internationally transferred mitigation outcomes count towards the buyer's target, and the seller must make a 'corresponding adjustment', adding the sold amount back to its own account so that the same tonne is not counted twice. Article 6.4 creates a central carbon market supervised under the UN, now called the Paris Agreement Crediting Mechanism; it issues a carbon credit for each verified tonne from approved projects and succeeds the Clean Development Mechanism, and part of its credits goes to fund adaptation. Article 6.8 covers cooperation that involves no trading at all. The basic rules were agreed at COP26 in Glasgow in 2021 and the remaining details at COP29 in Baku in 2024.

India is building its own domestic carbon market. The Energy Conservation (Amendment) Act, 2022 empowered the Central Government to specify a carbon credit trading scheme, and the Ministry of Power notified the Carbon Credit Trading Scheme on 28 June 2023. The Bureau of Energy Efficiency administers it, and each carbon credit certificate stands for one tonne of carbon dioxide equivalent. The scheme has two routes. Under the compliance mechanism, notified energy-intensive industries receive targets for greenhouse gas emissions per unit of output, and those that beat their targets earn certificates that they can sell to those that fall short. Under the offset mechanism, entities without such obligations can register projects that cut or remove emissions and earn certificates voluntarily. It builds on the Perform, Achieve and Trade (PAT) scheme of 2012, under which large plants that beat their energy-use targets could sell Energy Saving Certificates.

The Green Credit Programme is a different instrument. It was set up under the Environment (Protection) Act, 1986 through the Green Credit Rules notified by the Environment Ministry in October 2023, and it rewards voluntary environmental actions by individuals, companies, local bodies and other organisations with green credits that can be traded. Its list of activities reaches well beyond carbon: tree planting, water conservation and harvesting, sustainable agriculture, waste management, reducing air pollution, conserving mangroves and similar work. The Indian Council of Forestry Research and Education administers it. The distinction to hold on to: a carbon credit under the trading scheme measures tonnes of greenhouse gas and sits under the Energy Conservation Act and the Ministry of Power, while a green credit rewards an environmental action of any kind and sits under the Environment Ministry.

climate finance is the money that helps developing countries cut emissions and adapt. The UNFCCC places the duty to provide it on developed countries, and Article 9 of the Paris Agreement repeats that duty. Several funds carry the money. The Global Environment Facility, set up in 1991 with the World Bank as trustee, serves the climate convention and several other environmental treaties. The Green Climate Fund, created at Cancún in 2010 and based in Songdo, South Korea, is the largest dedicated climate fund. The Adaptation Fund, born under Kyoto and financed partly by a share of CDM credits, now also serves the Paris Agreement. Money for loss and damage, harm that adaptation cannot prevent, such as farmland lost to the sea, was the newest demand: COP27 at Sharm el-Sheikh (2022) agreed to set up a fund, and COP28 in Dubai (2023) made it operational on its first day, with the World Bank as interim host. At COP29 in Baku (2024) a new collective goal replaced the old 100 billion dollar pledge: developed countries are to take the lead in mobilising at least 300 billion US dollars a year by 2035. India criticised the figure as far too small.

The main climate funds
FundSet upKey facts
Global Environment Facility (GEF)1991World Bank is trustee; serves the UNFCCC and other environmental conventions
Green Climate FundCOP16, Cancún, 2010Based in Songdo, South Korea; funds mitigation and adaptation
Adaptation FundUnder the Kyoto ProtocolFinanced partly by a share of CDM credits; now also serves the Paris Agreement
Fund for responding to loss and damageAgreed at COP27 (2022); operational at COP28 (2023)World Bank as interim host; for harm adaptation cannot prevent

At home, the National Action Plan on Climate Change was released on 30 June 2008, years before India had any international target. It rests on eight national missions, each led by a ministry, which aim to make development cleaner and more resilient rather than to cap growth: the National Solar Mission, Enhanced Energy Efficiency, Sustainable Habitat, the National Water Mission, Sustaining the Himalayan Ecosystem, Green India, Sustainable Agriculture and Strategic Knowledge for Climate Change. States were asked to prepare State Action Plans on Climate Change in line with the national plan, and a National Adaptation Fund for Climate Change, set up in 2015 with NABARD as the implementing entity, pays for adaptation projects in the states.

The eight missions of the National Action Plan on Climate Change (2008)
MissionLead ministry or department
National Solar MissionNew and Renewable Energy
Enhanced Energy EfficiencyPower
Sustainable HabitatHousing and Urban Affairs
National Water MissionJal Shakti
Sustaining the Himalayan EcosystemScience and Technology
Green IndiaEnvironment, Forest and Climate Change
Sustainable AgricultureAgriculture and Farmers Welfare
Strategic Knowledge for Climate ChangeScience and Technology

India has also built international groups around its own priorities. The International Solar Alliance was launched by India and France at COP21 in Paris on 30 November 2015 to spread solar energy, especially among sunshine-rich countries. Its framework agreement entered into force on 6 December 2017, and its headquarters in Gurugram, Haryana, make it the first treaty-based intergovernmental organisation based in India. The Coalition for Disaster Resilient Infrastructure, launched by India at the UN Climate Action Summit in New York in September 2019, with its secretariat in New Delhi, helps countries build roads, power lines and other infrastructure that can withstand disasters. At the same summit India and Sweden launched the Leadership Group for Industry Transition (LeadIT) to help heavy industries such as steel and cement cut emissions. The Global Biofuels Alliance followed at the G20 summit in New Delhi in September 2023.

Seen as a whole, the climate regime has moved from top-down to bottom-up. The Kyoto Protocol told a few countries what to cut; the Paris Agreement asks every country what it will do, then relies on transparency, the five-yearly stocktake and the pressure of peers to push each nationally determined contribution upwards. Markets survive in a new form under Article 6. Finance is the hinge: developing countries' ambition depends on money that has repeatedly fallen short of their needs, which is why India keeps returning to common but differentiated responsibilities at every COP. India's own record combines intensity targets rather than absolute caps, net zero by 2070, a national plan built on eight missions, and leadership of alliances on solar power and resilient infrastructure. With the science of Part 1 and the institutions of Part 2, this completes the chapter.

Exam traps

Recap

Practice questions

Q1. In which year did the Paris Agreement on climate change enter into force?

  1. 2015
  2. 2016
  3. 2018
  4. 2020
Show answer

Answer: B. 2016

It entered into force on 4 November 2016, once 55 parties with 55 per cent of global emissions had joined. 2015 is the year of adoption at COP21; 2018 is when the rulebook was largely agreed at Katowice and has nothing to do with entry into force; 2020 was the start of the period its first contributions covered, not its entry into force.

Q2. Consider the following statements about the Paris Agreement:
1. Each party is legally bound to achieve the emission targets in its nationally determined contribution.
2. A global stocktake of collective progress is to be held every five years.
Which of the statements given above is/are correct?

  1. 1 only
  2. 2 only
  3. Both 1 and 2
  4. Neither 1 nor 2
Show answer

Answer: B. 2 only

Statement 2 is correct (Article 14). Statement 1 is wrong: the binding duty is to prepare, communicate and maintain an NDC and pursue measures towards it, not to achieve it. Option 1 picks the false statement, option 3 includes it, and option 4 rejects the true statement 2.

Q3. Under its updated nationally determined contribution of 2022, India aims to reduce the emissions intensity of its GDP by 2030, compared with the 2005 level, by:

  1. 33–35 per cent
  2. 40 per cent
  3. 45 per cent
  4. 50 per cent
Show answer

Answer: C. 45 per cent

The 2022 update raised the intensity target to 45 per cent. 33–35 per cent was the first (2015) target; 40 per cent was the 2015 goal for the non-fossil share of installed capacity; 50 per cent is the updated non-fossil capacity goal, not an intensity cut.

Q4. Consider the following pairs:
Fund : Where it was agreed
1. Green Climate Fund : COP16, Cancún
2. Fund for responding to loss and damage : COP21, Paris
3. Adaptation Fund : Kyoto Protocol
How many of the pairs given above are correctly matched?

  1. Only one
  2. Only two
  3. All three
  4. None
Show answer

Answer: B. Only two

Pairs 1 and 3 are correct. Pair 2 is wrong: the loss and damage fund was agreed at COP27 in Sharm el-Sheikh (2022) and made operational at COP28 in Dubai (2023), not at Paris. So 'only one' undercounts, 'all three' includes the wrong pair, and 'none' rejects two correct pairs.

Q5. Consider the following statements about India's Carbon Credit Trading Scheme, 2023:
1. It was notified under the Environment (Protection) Act, 1986.
2. It is administered by the Bureau of Energy Efficiency.
3. It includes an offset mechanism under which entities without targets can register projects voluntarily.
Which of the statements given above is/are correct?

  1. 1 and 2 only
  2. 2 and 3 only
  3. 1 and 3 only
  4. 1, 2 and 3
Show answer

Answer: B. 2 and 3 only

Statements 2 and 3 are correct. Statement 1 is wrong: the scheme was notified by the Ministry of Power under the Energy Conservation Act, 2001, as amended in 2022; it is the Green Credit Programme that rests on the Environment (Protection) Act. Options 1, 3 and 4 all include the false statement 1.

Q6. Which one of the following is NOT one of the eight national missions of the National Action Plan on Climate Change (2008)?

  1. National Mission for a Green India
  2. National Water Mission
  3. National Mission on Strategic Knowledge for Climate Change
  4. National Wind Energy Mission
Show answer

Answer: D. National Wind Energy Mission

There is no wind mission among the eight; the energy missions are the National Solar Mission and Enhanced Energy Efficiency. Green India, the Water Mission and Strategic Knowledge for Climate Change are all among the original eight, so options 1–3 are missions and cannot be the answer.

Q7. Consider the following pairs:
Initiative : Launched by or with
1. International Solar Alliance : India and France
2. Leadership Group for Industry Transition (LeadIT) : India and Sweden
3. Coalition for Disaster Resilient Infrastructure : India and Japan
Which of the pairs given above is/are correctly matched?

  1. 1 only
  2. 1 and 2 only
  3. 2 and 3 only
  4. 1, 2 and 3
Show answer

Answer: B. 1 and 2 only

Pairs 1 and 2 are correct. Pair 3 is wrong: CDRI was launched by India at the UN Climate Action Summit (2019), with its secretariat in New Delhi; it is not an India–Japan initiative. Option 1 leaves out the correct pair 2, and options 3 and 4 include the wrong pair 3.

Q8. Under Article 6.2 of the Paris Agreement, a 'corresponding adjustment' is made in order to:

  1. prevent the same emission reduction from being counted by both the selling and the buying country
  2. send a fixed share of every transfer to the Adaptation Fund
  3. convert old Kyoto credits into Paris credits
  4. set a single world price for carbon
Show answer

Answer: A. prevent the same emission reduction from being counted by both the selling and the buying country

The seller adds the transferred amount back to its own emissions account so that one tonne is counted only once. A share of proceeds for adaptation is a feature of the Article 6.4 mechanism, not of corresponding adjustments; the transition of old CDM activities is a separate rule; and the Agreement sets no global carbon price.

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