BRICS CARBON MARKET PARTNERSHIP: WHY A COMMON RULEBOOK MATTERS

Why In News?

Experts argue that the BRICS Carbon Markets Partnership needs a common rulebook, not a common trading platform, to become effective.  

What Is The BRICS Carbon Markets Partnership?

It is a collaborative framework established by BRICS member nations to coordinate on carbon pricing, emission reduction systems, and climate finance through a formal Memorandum of Understanding (MoU). 

Reaffirmed during the 18th BRICS Summit in New Delhi via the New Delhi Declaration, the partnership currently focuses on capacity-building and experience-sharing rather than an immediate joint trading platform or binding emission targets.

Core Objectives

• Pushback Against Unilateral Measures: Serves as a unified response from the Global South against protectionist climate-trade policies such as the European Union's Carbon Border Adjustment Mechanism (CBAM).  

• Common MRV Standards: Aims to establish a shared framework for Measurement, Reporting, and Verification (MRV) to make emission reductions transparent and comparable across different nations. 

• Mutual Recognition of Verifiers: Seeks to align verification and accreditation systems to create a consistent certification process. 

• Registry Harmonization: Plans to harmonize carbon registry data fields to prevent duplicate credit issuance and fraudulent claims.  

Current Challenges

• Fragmented Domestic Systems: BRICS members operate vastly different internal frameworks—for example, Brazil runs a cap-and-trade model (SBCE), whereas China and India use output-based emissions-intensity benchmarks (like India's Carbon Credit Trading Scheme or CCTS).  

• Varying Legal Status: Carbon units are regulated as securities in some member states (such as Brazil) while functioning as power-exchange certificates in others (such as India). 

• Lack of Direct Linkage: Compliance and voluntary carbon markets across member countries currently operate independently without cross-border credit fungibility. 

What Are Carbon Markets?

• Carbon Credit: One carbon credit usually equals one tonne of CO₂-equivalent reduced or removed.  

• Compliance Markets: Governments set legal emission limits or targets, and companies trade units to meet them.  

• Voluntary Markets: Companies and individuals buy credits voluntarily to meet their own climate goals. 

Two Main Designs

Paris Agreement, Article 6

• Article 6.2: It allows countries to transfer emission reductions bilaterally as Internationally Transferred Mitigation Outcomes (ITMOs), with corresponding adjustments to avoid double counting.  

• Article 6.4: It creates a UN-supervised crediting mechanism, the Paris Agreement Crediting Mechanism, which succeeds the Clean Development Mechanism of the Kyoto Protocol.   

• Article 6.8: It covers non-market cooperation. 

Why Do BRICS Carbon Markets Matter?

Scale

• Major Credit Suppliers: Brazil, China, India and Indonesia host over a third of carbon credit projects registered worldwide. 

• Voluntary Markets: Eight BRICS members reportedly run voluntary carbon markets. 

Growing Compliance Systems

• China: Its national Emissions Trading System, launched in 2021 for power, has been expanded to steel, cement and aluminium. 

• India: The Carbon Credit Trading Scheme (CCTS) has notified emission-intensity targets for 490 entities across nine sectors and introduced an offset mechanism. 

• Brazil: It set up the Brazilian Greenhouse Gas Emissions Trading System (SBCE) in 2024, based on an absolute emissions cap.

No Links Between Them

• Disconnected Markets: None of these national markets is linked to another, due to differences in rules, accounting and eligibility.  

What Is India's Carbon Credit Trading Scheme (CCTS)?

Legal And Institutional Framework

• Legal Basis: The Energy Conservation (Amendment) Act, 2022 enabled the CCTS, which was notified in 2023.  

• Administrator: The Bureau of Energy Efficiency (BEE) administers the scheme. 

• Trading: Carbon credit certificates trade on power exchanges under CERC regulations.  

• Predecessor: It builds on the Perform, Achieve and Trade (PAT) scheme for energy efficiency, launched in 2012. 

Global Recognition

• UK Recognition: In August 2026, the UK recognised India's Central Electricity Regulatory Commission (CERC), showing the value of accredited verification for exporters.

What Are The Key Differences Among BRICS Markets?

Different Legal Instruments: Because of these differences, the same emission reduction becomes a different legal instrument in each country.  

Why Is A Common Framework Needed?

Pressure From Carbon Border Taxes

• EU CBAM: The European Union's Carbon Border Adjustment Mechanism entered its definitive phase in January 2026. It charges for carbon in imports of steel, aluminium, cement, fertilisers, electricity and hydrogen. 

• UK CBAM: The UK will introduce its own CBAM in January 2027. 

• Need For Verified Data: Carbon prices paid at home are recognised only with verified evidence. Exporters without reliable data risk punitive default values.  

Collective Bargaining

• Unified Voice: BRICS has opposed unilateral CBAMs. A common framework would strengthen its bargaining power and cut compliance costs.  

Existing Foundation

• 2025 Principles: The 2025 BRICS Principles for Fair, Inclusive and Transparent Carbon Accounting provide a base for comparable benchmarks and interoperable systems.

What Does The Partnership Need?  

Priority 1: A Common Rulebook

• Common Monitoring Standards: Adopt consistent Measurement, Reporting and Verification (MRV) procedures, especially for sectors exposed to CBAM, using ISO 14064 standards while preserving national autonomy. 

• Mutual Recognition Of Verifiers: Accept verifiers accredited by members' national accreditation bodies. 

• Harmonised Registries: Use compatible data fields to share information and prevent double counting. 

Priority 2: A Limited Pilot Exchange

• Small Start: Two or three willing members could mutually recognise selected methodologies and allow capped transfers of authorised credits under Article 6.2. 

• Learning, Not Volume: The goal is to identify problems such as corresponding adjustments, legal classification of units and double counting, not to maximise trading.  

Priority 3: Use Existing Institutions

• New Development Bank (NDB): Set up by BRICS in 2014 and based in Shanghai, could host a shared registry data facility or buy pilot carbon units.  

• Adaptation Funding: Part of transfer proceeds could fund climate adaptation, encouraging members with limited mitigation potential to join.  

What Are The Key Challenges?

Diverging National Interests

• China's Dominance: China's huge industrial scale could make it the dominant price-setter.  

• Export Competition: Members compete in steel and aluminium exports, which discourages integration. 

• Sanctions: Sanctions on some members, such as Russia and Iran, may complicate financial settlements. 

Technical Complexity

• Linking Is Slow: Linking carbon markets takes years of negotiation, even among close partners.  

• Example: The EU and Switzerland began talks to link their emissions trading systems in 2010, but the link took effect only in January 2020, a decade later.  

Market Integrity

• Credit Quality: Concerns over low-quality or overstated credits in voluntary markets can hurt credibility.  

• Double Counting: Without corresponding adjustments, the same reduction could be claimed twice.  

Burden On Small Firms

• MSME Compliance Costs: Small exporters may struggle with the cost of measuring and verifying emissions. 

What Is The Way Forward?

Phased Approach

• Rules First, Trading Later: Build common MRV standards and registries before attempting any market linkage.  

• Learn From Article 6.2 Pioneers: Use bilateral deals as models for pilot transfers. 

• Example: In January 2024, Ghana transferred the first Internationally Transferred Mitigation Outcome (ITMOs) under Article 6.2 to Switzerland, showing how bilateral carbon transfers can work in practice.  

Strengthen India's Position

• Credible CCTS: Strengthen India's MRV systems and accredited verifiers to win wider recognition, as with the UK.  

• Support MSMEs: Provide digital carbon-accounting tools, verification subsidies and technical help.  

Global Cooperation

• Bridge With Other Initiatives: Engage with efforts such as the Open Coalition on Compliance Carbon Markets, launched by Brazil and joined by the EU and China in 2026, to align standards globally.  

• Climate Justice: Ensure carbon market rules respect common but differentiated responsibilities and support developing countries' growth.  

Conclusion

The BRICS Carbon Markets Partnership can give emerging economies a stronger voice in global climate governance, but only if it moves beyond broad commitments. A common rulebook on MRV, mutual recognition of verifiers, compatible registries and small pilot exchanges, backed by the New Development Bank, offer a realistic path that respects national autonomy while countering unilateral carbon border taxes.

Source: THEHINDU