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As India’s carbon markets take shape, embedding methodological transparency is essential to ensure environmental integrity, restore buyer confidence, and enable credible emissions reductions
In a space meant to measure carbon and climate integrity, the real deficit lies in a lack of transparency. Recent conversations on the Voluntary Carbon Market (VCM) have centred on the lack of clarity and depth in climate data reporting, but the opacity runs much deeper. With the release of the new offset mechanism methodologies for the Indian Carbon Market, the question of “problematic” VCMs comes to the fore.
Given India’s fragmented and unsupervised VCM, the offset mechanisms currently stand on precarious ground. Yet the possibilities for an intricately developed and meticulously planned offset mechanism exist in abundance. Given India’s history with market-based mechanisms like the Perform, Achieve, and Trade (PAT) scheme, and the literature available on the development of robust VCMs, India’s new carbon market can establish a concrete case study for an operable VCM that leads to intended emission reductions. Nonetheless, for such a market to function, opacity must be eradicated.
The problem lies not only in the visible layer of outcomes and numbers, but in the unseen foundations that shape them. It lies in the methodologies that define credibility. Clarity in methodology is fundamental to the integrity and credibility of the voluntary carbon market.
Additionality and permanence have been sore spots within the VCM since its inception. The ambiguity surrounding these characteristics allows for allusions to emission reductions that do not occur in an impactful way. A well-defined methodology allows policymakers, verifiers, and market participants to assess how carbon removal is achieved, how it is evaluated against a business-as-usual scenario, and how a business-as-usual estimation is conducted. Misapplied or outdated methodologies can distort project valuations, leading to over-crediting and weakening the credibility of the market as a whole. This has been the case with Verra’s rainforest ‘phantom credits’, found to be overcredited after studies found that they failed to meet the additionality criterion. This was a result of a misestimated business-as-usual scenario where the value added by these projects was found to be overvalued by 400 percent. Indeed, when methodologies are opaque or inconsistently updated across registries, projects developed under earlier assumptions often escape re-evaluation. This perpetuates outdated baselines and results in credits that no longer reflect real or current mitigation potential.
The VCM is fraught with actors who are simultaneously the buyers and the sellers, the verifiers and the mitigators. Such overlap increases the incidence of oversight and establishes loose compliance patterns. Ultimately, the absence of categorical bifurcation between the ‘enforcer’ and ‘participant’ in the market does not allow much room for transparency.
In fact, the VCM is fraught with actors who are simultaneously the buyers and the sellers, the verifiers and the mitigators. Such overlap increases the incidence of oversight and establishes loose compliance patterns. Ultimately, the absence of categorical bifurcation between the ‘enforcer’ and ‘participant’ in the market does not allow much room for transparency.
These factors raise doubts about the environmental integrity of the credits generated, impacting buyer confidence and market participation, and causing a malfunction in the price discovery mechanism of a market. Thus, for the voluntary carbon market to function as an effective instrument of climate policy rather than a speculative mechanism, methodological transparency must be embedded from the outset.
As India advances its nascent yet promising Compliance Carbon Market, the voluntary offset market is set to integrate alongside it. Together, mandatory emission reductions and voluntary carbon offsets will feed into a unified trading system. In this new ecosystem, transparency, especially in methodologies, becomes indispensable. When markets converge, so do their risks, and opacity in methodology can undermine buyer confidence and distort price discovery.
With the advent of a new market, compromises on additionality, permanence, and integrity are not viable options if the market is to retain its functionality. Yet, the Indian VCM has been found to harbour opacity in its operations, design, trade, and retirement. Additionality concerns have plagued the Indian VCM, adversely impacting buyer confidence as 80 percent of the largest offset projects based in India have been found to be ambiguous in their emission reduction deliverables. Approximately 7.7 million retired credits in 2024 came from nine “problematic” renewable energy projects based in India. With renewable energy prices approaching more affordable levels and their emission reductions becoming non-additional, buyers in the Indian VCM have visibly shifted away from renewable offset projects.
Additionality concerns have plagued the Indian VCM, adversely impacting buyer confidence as 80 percent of the largest offset projects based in India have been found to be ambiguous in their emission reduction deliverables. Approximately 7.7 million retired credits in 2024 came from nine “problematic” renewable energy projects based in India.
Indeed, the Indian VCM does not have a consolidated credit tracking platform. Trades take place independently, without documentation. The existence of intermediaries complicates credit history, increases information asymmetry, and makes it difficult to track the number of times a credit changes hands before it is finally retired. Such opacity in the system allows for profit-maximising and removal-minimising activities, as additionality and permanence often do not retain validity by the time a credit is retired. While an A-Z project timeline and credit history are necessary, in the meantime, clarity in methodology implementation, evaluation, and baseline setting can help keep a check on the environmental integrity of such credits.
The lessons learnt from India’s Perform, Achieve, and Trade (PAT) scheme and Renewable Energy Certificate (REC) market underscore the role of an operational market mechanism that cannot exist in the absence of buyer confidence in the quality of credits traded. Therefore, it is not enough to simply outline the additionality and permanence criteria in the offset mechanism. Given the opportunity for a more regulated national voluntary offset market, the standardisation and development of a holistic methodology for executing and monitoring offset programmes are pertinent.
The Bureau of Energy Efficiency’s recent release of nine methodologies and eleven tools, adapted from the Clean Development Mechanism’s extensive repository of over 200 methodologies, marks an important step forward. While these frameworks remain in development, they represent a shift towards structure and alignment. Indeed, the current methodology list is holistic across sectors and project types, but not comprehensive. At present, it lacks further details on Carbon Sequestration and Removal activities, covering only afforestation methods.
With the Indian Carbon Market (ICM) developing as a regulated body under national institutions, standardisation, verification, and unbiased accountability checks become a reality. Methodological transparency is not simply required at the onset of projects but also throughout their development.
As this repository grows, so too will the opportunities for credible offset projects in India. With these developments, however, strong oversight is necessary. A common weakness in voluntary markets across the globe is the lack of a centralised governance structure. With the Indian Carbon Market (ICM) developing as a regulated body under national institutions, standardisation, verification, and unbiased accountability checks become a reality. Methodological transparency is not simply required at the onset of projects but also throughout their development. Transparent data reporting can only occur in the event of public disclosure of methods used for monitoring, baseline calculation, and data collection. Thus, to ensure quality credits and reduce the vulnerability of the ICM, a strong framework for public disclosure and third-party verification is necessary. This is not simply good governance; it is the foundation of a market built to last.
Diya Shah is a Research Assistant with the Centre for Economy and Growth at the Observer Research Foundation.
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Diya Shah is a Research Assistant at ORF’s Centre for Economy and Growth. Her work explores developments in climate finance as part of a broader, ...
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