Aakash Jain

UI4051

PUI23001

This study investigates the potential for Urban Local Bodies in India to leverage carbon credits as a financing mechanism for climate action, addressing the critical gap between municipal climate plans and implementation. It was found that ULBs face barriers include regulatory complexity, price volatility, and institutional gaps. To address these challenges, the report proposes the CREDIT framework, a six-principle approach for ULBs to increase preparedness to participate in carbon markets. The framework is complemented by the CarbonMitra Toolkit, a user-friendly calculator designed to help ULBs estimate credit potential, costs, and revenue for waste projects.


Report Content

India is the 4th largest GHG emitter, which has led to issues like air pollution, water scarcity, and extreme weather events with cities at the forefront of facing climate challenges, contributing 70% of India’s GHG emissions.

And to achieve India’s 2070 net-zero commitment, significant investments are required in urban infrastructure. However, there is a substantial financing gap between the required climate investments and current spending. This highlights the need for innovative climate financing tools like carbon credits

Broadly there are two categories, compliance which are regulated systems by the governments and Participation is mandatory for certain sectors or companies. While voluntary markets are unregulated systems where entities voluntarily purchase carbon credits to offset their emissions.

In 2019, Indore Smart City Development Ltd registered 3 projects; a 600 TPD Compost plant, 50 TPD Bio-Methanation plants and a 101.50 MW Solar plant with the Verified carbon standard which is a voluntary carbon market. The crediting period was 10 years and the Estimated annual reductions were 283 Kilo tonnes.

Total Registration and verification cost is only 0.1% of the total project cost. Annul Estimated revenue is almost 13% of the estimated annual O&M costs and could constitute 1% of the total revenue receipts. Total estimated revenue over 10 years will be 1.2% of the total project cost.

I propose the carbon CREDIT framework where CREDIT is an acronym for the 6 principles of this framework.

Further these principles are integrated with the typical infrastructure project cycle, which allows ULBs to have a checklist to be carbon credit ready for any potential project.

This represents the implementation of the framework taking Chennai's Climate action plan as a case example.

CarbonMitra is a user-friendly calculator designed to help Indian urban local bodies (ULBs) estimate carbon credit potential from waste projects. By inputting waste volume and technology choices, ULBs can predict revenue, assess feasibility, and align with carbon market methodologies (VCS/CCTS).

The toolkit calculates three key outputs to guide planning and risk assessment. First, it provides credit potential segregated by wet, dry, and mixed waste processing, enabling ULBs to identify the most efficient project bundles. Second, it estimates future revenue, which helps in strategizing revolving funds and blended finance models. Third, the toolkit computes Monitoring, Registration and Verification costs, allowing ULBs to conduct a cost-benefit analysis by comparing these expenses against projected revenue. Additionally, users can test different CER price ranges to assess financial viability under market volatility, supporting risk mitigation planning.