Under the Kyoto Protocol, India could sell a carbon credit and lose nothing. Under the Paris Agreement, it cannot. That single change is the reason the document launched in New Delhi on 30 September 2026 needed to exist.
Japan's Ambassador to India, Keiichi Ono, and the then-Secretary of the Ministry of Environment, Forest and Climate Change, Tanmay Kumar, jointly launched the Operational Manual for the India–Japan Joint Crediting Mechanism (JCM). PIB announced it on 5 October 2026.
The sequence, and why there are three documents
| Step | Date |
|---|---|
| Memorandum of Cooperation signed | 7 August 2025 |
| Rule of Implementation adopted | 8 June 2026 |
| Operational Manual launched | 30 September 2026 |
Three instruments for one mechanism looks like process for its own sake. It is not. Under Article 6.2 of the Paris Agreement there is no United Nations registry, no central methodology panel and no international supervisory body. Two countries simply agree to transfer mitigation outcomes between themselves, and their bilateral agreement is the rulebook. Everything a UN mechanism would supply centrally — eligibility, methodologies, verification standards, the forms, the timelines — the two parties have to write for themselves.
Hence: an MoC to establish the intent, a Rule of Implementation to create the system, and an Operational Manual to specify the procedure. The Manual covers the full project cycle, from submission of a Project Idea Note through to the issuance and authorization of JCM credits. The Ministry describes the launch as a transition "from institutional preparation to implementation", which is an accurate description of what a procedural manual does.
India is roughly the thirty-first partner country in Japan's JCM network, and this is India's first bilateral carbon-market arrangement under the Paris framework.
Article 6, in three parts
The Paris Agreement's market and cooperation provisions divide into three:
- Article 6.2 — cooperative approaches. Bilateral or plurilateral. The unit is an ITMO: an Internationally Transferred Mitigation Outcome. Governance is decentralised; the parties design the mechanism and report to the UNFCCC.
- Article 6.4 — a centralised mechanism, UN-supervised, now called the Paris Agreement Crediting Mechanism (PACM). It is the successor to the Kyoto Protocol's Clean Development Mechanism (CDM).
- Article 6.8 — non-market approaches. Cooperation without a traded unit.
The India–Japan JCM is an Article 6.2 arrangement. It is bilateral by design, which is exactly why it moves faster than the centralised route and exactly why it needs its own three-document stack.
The corresponding adjustment
This is the concept the whole subject turns on, and it is simple once stated plainly.
When India authorises a mitigation outcome for transfer to Japan, India adds that tonne back to its own reported emissions, and Japan subtracts it from its own. The ledgers move in opposite directions by the same amount. The purpose is to prevent the same tonne of abatement from being counted by both countries — double counting — which would make global progress look larger than it is.
The consequence follows immediately: a credit is not free to the seller. India does not merely host the project and collect the money; it surrenders the emission reduction from its own national accounting. The abatement happens on Indian soil, and Japan gets to count it.
Why this is different from the CDM
Under the Kyoto Protocol, developing countries including India had no emission reduction targets. They had no ledger. So when an Indian project sold a Certified Emission Reduction to a buyer in an Annex I country, India lost nothing — there was no Indian account to debit. India became the second-largest host of CDM projects in the world on exactly that basis, and the arrangement was close to free money.
Under the Paris Agreement, every Party has a Nationally Determined Contribution. Every country has a ledger. The moment that became true, corresponding adjustment became unavoidable, because without it the same tonne would sit on two balance sheets.
This is the single most important conceptual shift from Kyoto to Paris in carbon markets, and it is the reason India's posture changed. A country that was once an enthusiastic seller of credits has every reason to be careful about exporting tonnes it needs for its own 45% emissions-intensity reduction target for 2030 and its 2070 net-zero commitment — the targets set out in India's NDC.
So what does India actually get?
The release says the mechanism will "support high-integrity emission reductions and removals in India" and "contribute to sustainable development in India". Both are true. But the credit goes to Japan and the tonne leaves India's books, so the gain has to be found elsewhere. There are two real answers and one condition.
The first gain is physical. The project is built in India, with Japanese capital and Japanese technology, and the asset stays — the electrolyser, the biogas plant, the capture unit, the efficient furnace. India keeps the plant and the operating experience permanently; Japan gets one accounting entry. On any long view that is a good exchange of durable for transient.
The second gain is institutional. Running an Article 6.2 pipeline forces India to build measurement, reporting and verification capacity to a standard an international counterparty will accept. India needs that capacity for its own market regardless, so the learning is not wasted even on the tonnes it sells.
The condition is additionality. If the project would have been built anyway, then India has sold a tonne it was going to abate in any case and received a payment for doing what it was already doing — a subsidy, but a subsidy bought with a tonne it needed. If the project would not have been built without JCM finance, India has acquired a facility it could not otherwise afford, at the price of a tonne it never had. The mechanism is beneficial in the second case and questionable in the first, and distinguishing the two is the hardest problem in carbon markets.
Which is why authorization is the pivotal step in the Manual's project cycle rather than a formality. Authorization is where India decides, project by project, whether a particular tonne is worth exporting. That decision stays sovereign. The Manual's real contribution is to make it procedural — governed by stated criteria and timelines — instead of ad hoc.
The reported list of eligible sectors suggests the design understands this. It includes solar thermal power, offshore wind, green hydrogen and ammonia, compressed biogas, sustainable aviation fuel, carbon capture, utilisation and storage, and high-efficiency industrial technologies. Every one of those is an expensive abatement option — the kind a domestic carbon price cannot yet reach. Nobody needs Japanese money to build utility-scale solar photovoltaic in Rajasthan; it is already the cheapest electricity available. Restricting the mechanism to costly abatement is additionality enforced structurally, by sector choice, rather than argued project by project.
Japan's own interest is equally straightforward. Japan has very high marginal abatement costs at home and a target to meet. Its JCM dates from 2013, predates the Paris Agreement, and has been retrofitted to Article 6.2 — a programme built for one regime and carried into the next.
The domestic other half
None of this makes sense without the Indian market it plugs into. India's Carbon Credit Trading Scheme (CCTS) was notified on 28 June 2023 by the Ministry of Power under Section 14AA of the Energy Conservation (Amendment) Act, 2022. It has two arms:
The compliance mechanism. Notified entities receive greenhouse gas emission intensity (GEI) targets — emissions per unit of output, not absolute caps. Beat the target and the entity earns tradable Carbon Credit Certificates; miss it and the entity must buy certificates or pay a penalty. Legally binding targets apply for compliance years 2025-26 and 2026-27 against a FY 2023-24 baseline, covering close to 490 entities across seven sectors.
The offset mechanism. Voluntary, for entities outside the compliance net, which earn certificates for verified reductions.
The Bureau of Energy Efficiency administers it. The crucial link to Article 6 is procedural: the corresponding adjustment is applied to India's national inventory before any credit is authorised for international transfer. CCTS and the JCM are therefore two ends of one accounting system — the domestic market described in our earlier explainer on the Carbon Credit Trading Scheme, and the international gateway opened by this Manual. The national inventory that both depend on is the one tracked through the net-zero and NAPCC reporting architecture.
A final note on intensity targets, because it matters for interpretation. A GEI target is a ratio. An entity can meet it while increasing absolute emissions, provided output grows faster. India's NDC headline is likewise an emissions-intensity reduction of 45% against 2005 levels — not an absolute cut. This is a deliberate choice for a growing economy, and it is a distinction that candidates routinely lose marks on.
🔑 Revision block
- Event: Operational Manual for the India–Japan Joint Crediting Mechanism launched in New Delhi on 30 September 2026 by Japan's Ambassador Keiichi Ono and the then-Secretary, MoEFCC, Tanmay Kumar. Announced by PIB on 5 October 2026.
- Sequence: MoC 7 August 2025 → Rule of Implementation 8 June 2026 → Operational Manual 30 September 2026. India is about the 31st partner in Japan's JCM network, and this is India's first bilateral carbon-market arrangement under Paris.
- Project cycle covered: from Project Idea Note to issuance and authorization of credits.
- Article 6 structure: 6.2 — cooperative approaches, bilateral, unit is the ITMO (Internationally Transferred Mitigation Outcome), decentralised governance. 6.4 — centralised, UN-supervised Paris Agreement Crediting Mechanism (PACM), successor to the CDM. 6.8 — non-market approaches.
- Why three documents: under 6.2 there is no UN registry or methodology panel, so the bilateral agreement is the rulebook.
- Corresponding adjustment: the seller adds the tonne back to its own emissions; the buyer subtracts it. Prevents double counting. Consequence — selling a credit costs the seller the tonne.
- Kyoto vs Paris: under Kyoto, developing countries had no targets, so a CER sale cost the host nothing; India became the second-largest CDM host. Under Paris every Party has an NDC, so every host has a ledger — which is why corresponding adjustment had to be invented.
- What India gains: the physical asset and operating experience stay in India; MRV capacity is built. Condition — additionality. If the project would have happened anyway, India has sold a tonne it needed.
- Why authorization matters: it is the sovereign, project-by-project decision on whether a tonne should be exported. The Manual makes it procedural rather than ad hoc.
- Reported eligible sectors: solar thermal, offshore wind, green hydrogen and ammonia, compressed biogas, sustainable aviation fuel, CCUS, high-efficiency industrial technologies — all high-cost abatement, which is additionality enforced by sector choice.
- Japan's JCM: started 2013, predates Paris, retrofitted to Article 6.2; around 30 partner countries. Japan has high domestic marginal abatement costs.
- CCTS: notified 28 June 2023, Ministry of Power, under Section 14AA, Energy Conservation (Amendment) Act, 2022. Compliance arm — GEI targets, tradable Carbon Credit Certificates, binding for 2025-26 and 2026-27, baseline FY 2023-24, close to 490 entities across 7 sectors. Offset arm — voluntary. Administered by BEE.
- Intensity, not absolute: a GEI target is a ratio, and so is India's NDC headline — a 45% reduction in emissions intensity of GDP against 2005, with net zero by 2070. Absolute emissions can rise while an intensity target is met.
🎯 Practice MCQs
Q1. The India–Japan Joint Crediting Mechanism operates under which provision of the Paris Agreement? (a) Article 6.2 (b) Article 6.4 (c) Article 6.8 (d) Article 9
→ (a) Article 6.2 governs bilateral and plurilateral cooperative approaches. Article 6.4 is the centralised UN-supervised mechanism, 6.8 covers non-market approaches, and Article 9 deals with climate finance.
Q2. The unit transferred under an Article 6.2 cooperative approach is called a: (a) Certified Emission Reduction (b) Carbon Credit Certificate (c) Internationally Transferred Mitigation Outcome (d) Renewable Energy Certificate
→ (c) An ITMO. CERs belong to the Kyoto-era CDM, Carbon Credit Certificates to India's domestic CCTS, and RECs to renewable purchase obligations.
Q3. A "corresponding adjustment" requires that: (a) The buyer and seller split the credit equally (b) The transferring country add the transferred reduction back to its own reported emissions (c) The project be verified by a UN-accredited body (d) The host country match the credit with an equivalent afforestation commitment
→ (b) The seller adds the tonne back and the buyer subtracts it, so the same abatement is not counted twice. It is an accounting rule, not a verification or offset requirement.
Q4. The reason corresponding adjustment was unnecessary under the Kyoto Protocol's CDM was that: (a) The CDM dealt only in removals, not reductions (b) The CDM was supervised by the UNFCCC Secretariat (c) CDM credits could not be traded across borders (d) Developing host countries had no emission reduction targets, and therefore no accounts to debit
→ (d) No ledger, no debit. Paris gave every Party an NDC, which created a ledger for every host and made the adjustment unavoidable.
Q5. India's position as a seller of carbon credits has become more cautious under the Paris Agreement principally because: (a) Every transferred tonne now has to be added back to India's own emissions, making its NDC harder to meet (b) International carbon prices have collapsed (c) The CDM registry was closed without a successor (d) India has withdrawn from Article 6 negotiations
→ (a) The tonne sold is a tonne India can no longer count toward its 45% intensity reduction or its 2070 net-zero pathway.
Q6. The strongest argument that the JCM benefits India is that: (a) India receives ITMOs from Japan in exchange (b) The project asset and the operating experience remain permanently in India (c) India is exempted from corresponding adjustment as a developing country (d) JCM credits may be counted toward India's own NDC
→ (b) India keeps a durable physical asset and the capability to run it; Japan receives a single accounting entry. There is no developing-country exemption from the adjustment, and an authorised credit cannot be double-counted by India.
Q7. India's Carbon Credit Trading Scheme was notified in 2023 under: (a) The Environment (Protection) Act, 1986 (b) The Electricity Act, 2003 (c) The Air (Prevention and Control of Pollution) Act, 1981 (d) Section 14AA of the Energy Conservation (Amendment) Act, 2022
→ (d) The Ministry of Power notified CCTS on 28 June 2023 under the amended Energy Conservation Act, and the Bureau of Energy Efficiency administers it.
Q8. Under the CCTS compliance mechanism, obligated entities are assigned: (a) Absolute caps on annual greenhouse gas emissions (b) Renewable purchase obligations (c) Greenhouse gas emission intensity targets, expressed per unit of output (d) Energy-saving certificates based on specific energy consumption
→ (c) GEI targets are ratios. An entity can meet one while absolute emissions rise, if output grows faster — the same logical structure as India's NDC intensity target.
Q9. The eligible JCM sectors reported — solar thermal, offshore wind, green hydrogen, CCUS, sustainable aviation fuel — share the feature that they are: (a) High-cost abatement options that a domestic carbon price cannot yet reach (b) Already the cheapest abatement available in India (c) Confined to the seven sectors notified under CCTS compliance (d) Restricted to removals rather than reductions
→ (a) Choosing expensive abatement enforces additionality structurally. No external finance is needed to build utility-scale solar photovoltaic in India, which is why it does not appear on such a list.
Q10. The reason an Article 6.2 arrangement requires a bilateral Operational Manual at all is that: (a) The UNFCCC requires every bilateral agreement to be published in manual form (b) Article 6.2 has no central registry or methodology panel, so the parties must write their own rules (c) Manuals are needed to convert CERs into ITMOs (d) The Paris Agreement prohibits the use of standard methodologies
→ (b) Decentralised governance is the defining feature of 6.2. Everything a UN mechanism would supply centrally — methodologies, verification standards, forms and timelines — the two parties must specify themselves.
📋 How this gets asked (PYQ pattern)
Carbon markets are examined in four recognisable ways, and the first is a vocabulary test disguised as a policy question.
The first is unit names. CER for the Kyoto CDM, ITMO for Article 6.2, Carbon Credit Certificate for India's CCTS, REC for renewable purchase obligations, ESCert for the earlier PAT scheme. Five units, five regimes, and the paper will offer the wrong one as a plausible distractor every time.
The second is the Article 6 split. 6.2 bilateral and decentralised; 6.4 centralised and UN-supervised, the CDM's successor; 6.8 non-market. A question that describes a mechanism and asks which Article governs it is close to standard.
The third is the Kyoto-to-Paris shift. Why did selling credits cost nothing then and cost a tonne now? The answer — universal NDCs created universal ledgers, which made corresponding adjustment necessary — is a two-mark point in an objective paper and a paragraph in a written one.
The fourth is intensity versus absolute. India's NDC headline is a 45% reduction in emissions intensity of GDP against 2005, and CCTS compliance targets are GEI ratios. Any statement that India has committed to cutting absolute emissions by 45% by 2030 is wrong, and that misstatement appears as a distractor regularly.
Preparing for CDS/OTA? With any climate instrument, ask who ends up holding the tonne. Ownership of the accounting entry, not the location of the project, is what the question is usually really about. Build the base with our CDS/OTA study material, follow the daily CDS current affairs, and prepare with our faculty in the upcoming Cavalier courses in Delhi.
✍️ Written by Aditya Tiwari — Faculty, Economy & Polity, at The Cavalier. Reviewed by the Cavalier Faculty Desk.