India and Japan have officially adopted the Rules of Implementation for the Joint Crediting Mechanism (JCM), marking a significant step in bilateral climate cooperation. This framework, established under Article 6.2 of the Paris Agreement, allows for the transfer of advanced low-carbon technologies and the generation of carbon credits. The announcement by the Ministry of Environment, Forest and Climate Change (MoEFCC) provides the first operational pathway for India to engage in international carbon trading to meet its global climate commitments.
What is the Joint Crediting Mechanism (JCM)?
The Joint Crediting Mechanism (JCM) is a bilateral system initiated by the Government of Japan to facilitate the diffusion of advanced decarbonisation technologies and infrastructure to partner countries. Under this mechanism, Japan provides financial support and technical expertise for green projects in India. In return, the greenhouse gas (GHG) emission reductions achieved by these projects are quantified and shared as carbon credits between both nations.
These credits, known as Internationally Transferred Mitigation Outcomes (ITMOs), help both India and Japan meet their Nationally Determined Contributions (NDCs) under the Paris Agreement. Japan has established similar partnerships with 32 countries globally, and India became a key partner following a Memorandum of Cooperation (MoC) signed in August 2025. This framework is specifically designed to bridge the viability gap for high-cost, low-carbon technologies that might otherwise be difficult to implement.
Key Features of the Rules of Implementation
The newly adopted Rules of Implementation provide the “how-to” for the JCM, ensuring that all projects are transparent and maintain environmental integrity. These rules define the governance structure and the lifecycle of projects from inception to the issuance of credits.
Governance and Oversight
The mechanism is governed by a Joint Committee (JC), which consists of representatives from both the Indian and Japanese governments. The JC is responsible for:
- Approving project methodologies and baseline calculations.
- Overseeing the registration of projects and the issuance of carbon credits.
- Ensuring that all projects contribute to the sustainable development goals of India.
Monitoring and Verification
A critical aspect of the rules is the mandate for Measurement, Reporting, and Verification (MRV). Every project must undergo third-party validation and verification to ensure that the emission reductions are real, permanent, and additional. This prevents “double counting,” a situation where both countries claim the same emission reduction. To support this, both nations will maintain synchronized national registries to track the creation and transfer of every credit.
Understanding Article 6.2 and ITMOs
The Paris Agreement, adopted in 2015, includes Article 6, which provides a framework for countries to cooperate voluntarily to reach their climate targets. Article 6.2 specifically governs decentralized bilateral or multilateral cooperation through market-based mechanisms.
The “currency” of these trades is the Internationally Transferred Mitigation Outcome (ITMO). An ITMO represents a specific amount of greenhouse gas emission reduction (measured in tonnes of CO2 equivalent) that is authorized for transfer between countries. To maintain the integrity of the global climate goals, countries use a system called Corresponding Adjustments. When India sells an ITMO to Japan, India adds that amount back to its emissions tally, while Japan subtracts it from its own. This accounting adjustment ensures that the same reduction is not claimed by both nations, keeping the total global emissions data accurate.
Strategic Significance for India’s Net Zero Target
The operationalisation of the JCM is a major milestone for India as it works toward its Net Zero 2070 target. By participating in this bilateral market, India can attract significant Foreign Direct Investment (FDI) and gain access to high-end technologies that are otherwise cost-prohibitive.
The MoEFCC has already identified 13 eligible activities for Article 6 trading. These sectors are prioritized for their potential to reduce emissions and attract international finance. They include:
- Green Hydrogen and Green Ammonia production.
- Carbon Capture, Utilization, and Storage (CCUS).
- Offshore Wind and solar thermal power.
- Sustainable Aviation Fuel (SAF) and emerging mobility solutions.
For India, the JCM acts as a catalyst for industrial decarbonization, particularly in “hard-to-abate” sectors like steel and cement. It also aligns with the domestic Carbon Credit Trading Scheme (CCTS), which was notified in 2023 to create a structured carbon market in India administered by the Bureau of Energy Efficiency (BEE).
Governance and Institutional Framework
To manage the complexities of international carbon trading, India has established a multi-tier governance structure. The National Designated Authority for Implementation of Article 6 of the Paris Agreement (NDAIAPA) serves as the apex body. Chaired by the Secretary of the MoEFCC, this authority is responsible for approving projects and authorizing the transfer of ITMOs to foreign entities.
In addition to the NDAIAPA, the National Steering Committee for Indian Carbon Market (NSCICM) provides overall guidance. The Bureau of Energy Efficiency (BEE), established in 2002 under the Energy Conservation Act, 2001, plays a central role as the administrator of the domestic carbon market. By integrating the JCM with these existing institutions, India ensures that its bilateral agreements are consistent with its national energy and climate policies.
Key Takeaways
- India and Japan have adopted the Rules of Implementation for the Joint Crediting Mechanism (JCM), operationalizing bilateral carbon trading.
- This framework is established under Article 6.2 of the Paris Agreement, which allows for voluntary cooperation through Internationally Transferred Mitigation Outcomes (ITMOs).
- A Joint Committee consisting of representatives from both countries will oversee project approvals and the issuance of carbon credits.
- To prevent double counting, both nations will apply Corresponding Adjustments to their national emission inventories.
- India has identified 13 eligible activities for Article 6 trading, including Green Hydrogen, Carbon Capture, and Offshore Wind.
- The NDAIAPA, chaired by the MoEFCC Secretary, is the apex body responsible for authorizing international carbon credit transfers.
- The JCM aims to facilitate technology transfer and attract FDI to support India’s goal of reaching Net Zero by 2070.
