Same Sky, Different Responsibilities: Rethinking Carbon Justice within India

With the carbon market expected to become operational within the next four months and the Indian Carbon Market portal already established, India appears well-positioned to initiate its transition toward decarbonization through carbon trading mechanisms. The carbon market will act as a balancing system for emissions, where entities that exceed their targets can purchase carbon credits from those that have emitted less than their allotted limits. The government has established greenhouse gas emission intensity objectives for 490 obligated entities beginning in 2026 as part of its compliance framework. The carbon market will give these organizations flexibility and financial incentives to comply with the requirement to lessen their carbon impact. 

However, imposing a centralized and uniform carbon emission cap across all states may lead to inequitable outcomes, particularly for regions with lower levels of industrialization. States in the Northeast, for instance, contribute significantly less to overall emissions compared to heavily industrialized states such as Maharashtra, Gujarat, Chhattisgarh, Odisha, etc. Applying identical compliance obligations across such structurally diverse economies risks penalizing less-developed states by constraining their future growth potential, despite their historically and current low emissions. According to the Council on Energy, Environment and Water (CEEW) (2023) and NITI Aayog (2023) India Climate & Energy Dashboard, emissions are concentrated in a few industrial states. There are significant policy ramifications to this emissions concentration pattern. First, it implies that focusing on a small number of high-emitting states and industries could result in disproportionately substantial mitigation gains, increasing the cost-effectiveness of climate policy. Besides, it draws attention to the possibility that, in the absence of flexible mechanisms like interstate trading, a uniform carbon price or cap-and-trade system may overburden industrial states while underutilizing mitigation potential elsewhere. More importantly, it emphasizes that India's decarbonization problem is not uniformly distributed but rather structurally ingrained in its federal economic geography, where emissions and industrial growth are closely related. Additionally, as dominant suppliers of carbon credits, less polluting states can influence market outcomes. An oversupply of credits may depress prices, particularly in the absence of sufficient demand from high-emission regions, thereby diluting the effectiveness of the market unless regulatory mechanisms ensure supply discipline.

Similar to the Common but Differentiated Responsibilities (CBDR) concept used in international climate discussions, there is a compelling case for implementing differentiated obligations at the sub-national level to remedy this imbalance. Although egalitarian in theory, a state-by-state CBDR system has a number of real-world drawbacks. One significant worry is the possibility of carbon leakage, which occurs when businesses move from areas with more stringent emission regulations, like Gujarat, to states with more lax regulations, like Assam, changing rather than lowering emissions. Differentiated duties may also face political opposition from industrialized, high-emission states that view them as a hindrance to their economic expansion. The absence of reliable, up-to-date state-level emissions data is another crucial problem that makes monitoring, reporting, and verification more difficult and possibly less reliable.

By building a system to reward current efficiency rather than penalize previous emissions, this issue can be resolved. Output-based allocation, which links allowances to emissions per unit of production, is one method to achieve this. This ensures that more efficient industries are not penalized just because they produce more. Revenue recycling is equally crucial. To help industrial states view the system as an investment rather than a loss, a portion of the money raised from carbon trading or auctions should be reinvested in clean technologies, green infrastructure, and sectoral decarbonization in highly industrial states. Additionally, establishing a robust monitoring, reporting, and verification (MRV) system along with a data system will be quintessential. However, to begin with, existing databases can be leveraged for accounting emissions across states. Given the size and diversity of India, this concept may seem unrealistic to many, but it has a lot of promise as a long-term solution to the problems brought on by fast industrialization. The nation must carefully balance economic growth with its climate commitments as it continues to expand. A promising framework for coordinating development with environmental sustainability in this situation is provided by a state-based implementation of Common But Differentiated Responsibilities (CBDR). Such distinct and context-sensitive approaches should be carefully considered and gradually explored over time if India is to meet its net-zero target by 2070.

(The author is a scholar in the Indian School of Public Policy, New Delhi  and holds a masters in biotechnology from St. Xavier’s College, Kolkata)