The European Union (EU) recently submitted their updated Nationally Determined Contributions (NDCs) to the United Nations Framework Convention on Climate Change (UNFCCC), days ahead of the 30th Conference of the Parties (COP30). The update builds on the European Council’s agreement on a 2040 climate target that envisions the use of high-quality international credits to balance ambition with cost efficiency—effectively leveraging the Paris Agreement Article 6.2.

Under the European Climate Law, the EU has committed to reducing its net greenhouse gas emissions by 90 per cent by 2040, compared to 1990 levels. The EU’s proposal for a carbon credit buying mechanism to offset its targets under the EU Emissions Trading System (EU ETS) works similarly to the Clean Development Mechanism (CDM), which was set up by the now obsolete Kyoto Protocol. The mechanism can be beneficial to significant carbon credit suppliers such as India. But the benefits are overstated—India would do well to tread with caution.

What’s in it for India?

The mechanism represents an additional source of demand for carbon credits in India, provided monitoring and verification adhere to the standards set in the Paris Agreement. It could also compensate for the risk of low domestic demand due to modest emissions intensity targets in the initial phases of the domestic carbon market (Carbon Credit Trading Scheme [CCTS]) and protect........

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