Linking Carbon Markets: A case study of India's PAT and REC Schemes

Following the enactment of the Paris Agreement, the carbon markets in national and international spheres are poised for revival. Although the global carbon market dependent on the Kyoto Protocol have nearly collapsed, many voluntary or national carbon markets are still functioning in several countries under relevant regulations or voluntary arrangements. These include markets and trading systems such as Renewable Energy Certificates (REC) and Perform Achieve and Trade (PAT) in India.

One of the key questions emerging from the Paris Agreement is how such existing markets are to be integrated with the cooperative mechanisms to be evolved under Article 6 of the Agreement.

In this paper, it is proposed to discuss the broad framework of and requirements for linking two distinct carbon markets. The case of two Indian market-based mechanisms (MBM) - PAT and REC schemes will be taken to analyse and discuss the issues involved in integrating such markets for the purpose of Article 6 arrangements.