India's National energy Policies.

The source analyzes India's Perform, Achieve, and Trade (PAT) scheme, an energy efficiency trading program, as a case study for carbon market evolution in the Global South. It evaluates the scheme's design, performance, and challenges from 2012 to 2022, noting its success in reducing energy intensity but also limitations like low market liquidity and weak enforcement. The paper compares PAT to established global carbon markets, such as the EU Emissions Trading System (ETS) and China's national ETS, to identify gaps and offer recommendations for India's proposed national carbon market. Ultimately, it contributes to discussions on adapting market-based environmental regulations to diverse economic and institutional contexts.

The sources primarily detail the Intergovernmental Panel on Climate Change (IPCC) assessment reports and India's approach to carbon markets.

IPCC Assessment Reports (ARs) The IPCC, established by the World Meteorological Organization and the United Nations Environment Programme, is the leading body for assessing climate change, preparing comprehensive reports typically every five to seven years. These reports cover causes, impacts, vulnerability, and response strategies including mitigation and adaptation. IPCC reports are designed to be neutral with respect to policy, objectively dealing with scientific, technical, and socio-economic factors relevant to policy application. The preparation involves extensive author selection, a multi-stage writing process, and a rigorous expert and government review. Summaries for Policymakers (SPMs) are approved line by line by all member countries.

Fifth Assessment Report (AR5) Finalized in 2014, the AR5 provided an update on climate change knowledge, including socio-economic aspects, implications for sustainable development, detailed regional information, and precise considerations of risk, economics, and ethics. It comprised contributions from three Working Groups (WGI: Physical Science Basis; WGII: Impacts, Adaptation, and Vulnerability; WGIII: Mitigation of Climate Change) and a Synthesis Report (SYR). Key new features in AR5 included a new set of scenarios, dedicated chapters on sea-level change, the carbon cycle, and climate phenomena like monsoons and El Niño, greater regional detail, and a focus on risk management and UNFCCC Article 2.

Sixth Assessment Report (AR6) The AR6 Synthesis Report, "Climate Change 2023," summarizes the state of climate change knowledge, its impacts and risks, and mitigation/adaptation efforts since AR5.

• Observed Changes: Human activities, primarily greenhouse gas (GHG) emissions, have unequivocally caused global warming, reaching 1.1°C above 1850-1900 levels in 2011-2020. Global GHG emissions continued to increase during 2010-2019, with unequal historical and ongoing contributions across regions and individuals. Human-caused climate change is already affecting weather and climate extremes globally, leading to widespread adverse impacts on food and water security, human health, and economies, with vulnerable communities disproportionately affected.

• Responses to Date: International agreements like the UNFCCC, Kyoto Protocol, and Paris Agreement have accelerated climate action, with mitigation policies contributing to decreased global energy and carbon intensity. Low-emission technologies have become more affordable, and adaptation planning has generated multiple benefits. However, global tracked finance for mitigation and adaptation, while increasing, still falls short of needs.

• Gaps and Insufficiencies: Significant gaps exist between global ambitions, national commitments (NDCs), and actual implementation for both mitigation and adaptation. NDC implementation would likely lead to warming exceeding 1.5°C. Adaptation gaps persist, with many initiatives being fragmented or incremental, and leading to maladaptation in some cases. Systemic barriers include insufficient funding, knowledge gaps, and lack of climate literacy.

• Long-Term Futures: Future warming depends on cumulative net CO2 emissions. Limiting warming to 1.5°C or 2°C requires deep, rapid, and sustained GHG emission reductions in all sectors. Overshoot pathways (exceeding a warming level temporarily) result in more adverse and potentially irreversible impacts. Many climate-related risks are assessed to be higher than in AR5, with projected long-term impacts multiple times higher than currently observed. Sea level rise is unavoidable for centuries to millennia.

• Near-Term Responses: Accelerated implementation of adaptation and deep, rapid, and sustained mitigation are crucial in this decade to reduce climate risks and secure a liveable future. Feasible, effective, and low-cost mitigation and adaptation options are available across sectors. Actions prioritizing equity, climate justice, and inclusion lead to more sustainable outcomes and advance climate-resilient development. Financial flows for climate action need to increase many-fold, and international cooperation and technology innovation are critical enablers.

Seventh Assessment Report (AR7) - Special Report on Climate Change and Cities (SRCities) The IPCC decided that the AR7 cycle will include a Special Report on Climate Change and Cities, slated for early 2027. The scoping meeting for this report, held in April 2024, brought together experts to outline its content and structure. The proposed outline includes five chapters: "Cities in the context of climate change: framing," "Cities in a changing climate: trends, challenges and opportunities," "Actions and solutions to reduce urban risks and emissions," "How to facilitate and accelerate change," and "Solutions by city types and regions". The report aims to provide actionable knowledge, focusing on the complexity and diversity of cities, incorporating diverse knowledge systems, and addressing issues of informality, equity, and justice.

Carbon Markets in the Global South: India’s PAT Scheme India's Perform, Achieve, and Trade (PAT) scheme, launched in 2012, is a pioneering energy efficiency trading program in the Global South. Unlike traditional cap-and-trade systems (like the EU ETS or China ETS), PAT operates as a baseline-and-credit model focused on energy efficiency rather than direct CO2 emissions. Designated Consumers (DCs) are given energy reduction targets, and those who exceed them receive tradable Energy Saving Certificates (ESCerts).

• Performance: Between Cycle I and IV (2012-2022), PAT reported substantial energy savings (over 92 million tonnes of oil equivalent) and averted approximately 66 million tonnes of CO2 emissions.

• Challenges: The scheme faces limitations such as low market liquidity, modest trading volumes, low ESCert prices (INR 200–400), inconsistent sectoral participation, and weaknesses in Measurement, Reporting, and Verification (MRV) systems. Its focus on energy efficiency also restricts linkages to broader carbon finance mechanisms.

• Future Trajectory: India is developing a National Carbon Market (NCM) under the Carbon Market Development Framework (CMDF), aiming to integrate PAT with GHG-based emissions trading. Recommendations for the NCM include transitioning to CO2-based metrics, strengthening MRV with third-party verification and digital upgrades, developing market liquidity, integrating with international carbon finance, and ensuring equity and just transition principles.

Frequently Asked Questions (FAQs)

1. What is the IPCC, and what are its main activities? 

The Intergovernmental Panel on Climate Change (IPCC) is the leading body for the assessment of climate change, established by the World Meteorological Organization and the United Nations Environment Programme. Its main activity is to prepare comprehensive assessment reports about climate change at regular intervals, typically every five to seven years. These reports cover the causes of climate change, its impacts and vulnerability, and response strategies like mitigation and adaptation.

2. What are the key updates or new features in the IPCC Fifth Assessment Report (AR5) compared to previous reports? 

The AR5, finalized in 2014, provided updates on knowledge including information on socio-economic aspects and their implications for sustainable development, more detailed regional information, and more precise considerations of risk, economics, and ethics. New features included a new set of scenarios for analysis, dedicated chapters on sea-level change, the carbon cycle, and climate phenomena (e.g., monsoons, El Niño), and a broader treatment of impacts, adaptation, and vulnerability in human systems and the ocean. It also emphasized risk management and information relevant to the stabilization of greenhouse gas concentrations as per UNFCCC Article 2.

3. How has the assessment of climate change impacts evolved in AR6 compared to AR5? 

In AR6, many climate-related risks are assessed to be higher than in AR5. The extent and magnitude of climate change impacts are larger than previously estimated. Evidence of observed changes in extremes like heatwaves, heavy precipitation, and droughts, and their attribution to human influence, has strengthened since AR5. Losses and damages are unequivocally increasing and are disproportionately affecting vulnerable communities.

4. What are the current gaps in climate action, according to AR6? 

Despite progress, there are significant gaps between global climate ambitions, declared national ambitions (NDCs), and current implementation for both mitigation and adaptation. For mitigation, global GHG emissions implied by current NDCs would likely lead to warming exceeding 1.5°C, and there's an "implementation gap" where policies enacted by the end of 2020 project even higher emissions than NDCs. For adaptation, gaps persist in implementation, which is often fragmented and small-scale. Insufficient financing is a key barrier for both mitigation and adaptation, particularly in developing countries, and public and private finance flows for fossil fuels are still greater than those for climate action.

5. What is the purpose of the upcoming IPCC Special Report on Climate Change and Cities (SRCities) for the AR7 cycle? 

The SRCities aims to summarize the state of knowledge on climate change, its widespread impacts and risks, and mitigation and adaptation within the urban context, specifically since the publication of AR5 in 2014. It will integrate findings from the AR6 Working Group and Special Reports, recognizing the interdependence of climate, ecosystems, biodiversity, and human societies, and the linkages between adaptation, mitigation, ecosystem health, human well-being, and sustainable development. The report seeks to provide actionable knowledge and identify opportunities for effective, feasible, just, and equitable transformative action for cities.

6. What is India's Perform, Achieve, and Trade (PAT) scheme, and how does it differ from traditional carbon markets? 

India's PAT scheme, launched in 2012, is a pioneering energy efficiency trading program in the Global South. It is a baseline-and-credit system that focuses on incentivizing energy savings in energy-intensive industrial sectors rather than directly capping and trading CO2 emissions. Companies that exceed their energy reduction targets receive tradable Energy Saving Certificates (ESCerts). In contrast, traditional cap-and-trade systems (like the EU ETS) set an absolute emissions limit and allocate tradable permits for direct CO2 emissions.

7. What are the main challenges faced by India's PAT scheme? 

Despite its success in achieving energy savings, the PAT scheme faces several challenges:

• Low Market Liquidity: There is a surplus of ESCerts and low demand, resulting in limited trading and subdued prices.

• Limited Scope: Its focus on energy efficiency rather than direct CO2 emissions restricts its linkage to broader carbon finance mechanisms and international markets.

• MRV Limitations: Inconsistencies in audit quality, data disclosure, and delayed verification impede its credibility.

• Lack of Integration: PAT operates in isolation from India's growing voluntary carbon market and lacks convergence with GHG inventories or international offsets.

• Inconsistent Sectoral Participation: Performance varies widely across sectors.

8. How is India planning to evolve its carbon market, building on the PAT scheme? 

India is developing a broader National Carbon Market under the Carbon Market Development Framework (CMDF), announced in 2023. This framework envisions a phased approach to national emissions trading, integrating the PAT scheme with emissions-based targets, creating a Carbon Credit Trading Scheme aligned with UNFCCC principles, and developing a unified carbon registry and digital MRV system. Recommendations for this transition include establishing CO2 baselines alongside energy metrics, strengthening MRV, developing market liquidity (e.g., through price floors/ceilings), integrating with international carbon finance (e.g., Article 6 markets), and ensuring equity and a just transition.