What the BRICS carbon market partnership needs ?

Relevance – GS 2 || International Relations  | International Institutions | Global Agreements and Partnerships || GS 3 | Environment

Context : 

• On September 12, at the 18th BRICS Summit in New Delhi, the New Delhi Declaration confirmed that BRICS members look forward to implementing the Memorandum of Understanding on the BRICS Carbon Markets Partnership. 
• The commitment remains modest due to lack of a common framework on  measurement, reporting and verification (MRV). 
  

BRICS’ members Carbon Market : 

• Eight BRICS members reportedly operate voluntary markets, and Brazil, China, India and Indonesia host over a third of the carbon credit projects registered worldwide 

• China’s emissions trading system (ETS) — added steel, cement and aluminium through its 2024-25 allocation plan 

• India’s Carbon Credit Trading Scheme (CCTS) has notified emission-intensity targets for 490 entities across nine sectors and opened an offset mechanism. 

• Brazil’s Law of 2024 establishes the Brazilian Greenhouse Gas Emissions Trading System (SBCE), a cap-and-trade system. 

However, none of these markets is linked to another, all these carbon markets operate individually. 

Challenges: Divergence and Lack of Linkage

• Different Approaches: China and India use output-based emissions-intensity benchmarks, whereas Brazil uses an absolute emissions cap.
• Inward-Looking Offset Rules: China and India restrict eligible credits to their specific domestic frameworks and dates, while Brazil awaits a new accrediting body.
• Varying Legal Status: Carbon units are regulated as securities in Brazil but traded as certificates on power exchanges under the Central Electricity Regulatory Commission (CERC) in India, meaning the same carbon abatement has different legal standing across jurisdictions.

External Urgency: Western Border Adjustments

• CBAM Implementation: The European Union’s Carbon Border Adjustment Mechanism (CBAM) took definitive effect in January 2026, with the UK following in January 2027. Both penalize embedded carbon in imports like steel, aluminum, and cement unless verified carbon prices have been paid at the origin.
• Unilateral Relief: While the UK recognized India’s CCTS in August 2026, these decisions are made unilaterally by Western nations. Exporters without verified data face punitive default carbon values.

Proposed Solutions for BRICS

• A Common MRV Rulebook: Rather than a unified trading platform, BRICS needs a common framework for measurement, reporting, and verification (MRV). This rulebook should:
  1. Set monitoring rules consistent with ISO 14064 for sectors exposed to border taxes.
  2. Establish mutual recognition of verifiers accredited by members’ national bodies.
  3. Harmonize registry data fields to give BRICS a collective reference point against foreign regulators.
• Pilot Exchange Project: A small-scale pilot under Article 6.2 of the Paris Agreement could test bilateral transfers of mitigation outcomes. This would help identify and solve frictions related to cross-border settlements, double issuance prevention, and capital account regulations.
• Institutional Support: The New Development Bank could host a shared registry data facility or purchasing facility to support this pilot, potentially directing some transfer proceeds toward climate adaptation for members with limited mitigation potential.

Conclusion : 

A unified BRICS carbon market is essential to combat climate change. By harmonizing carbon accounting, these major economies can drive global emission reductions, fund local climate adaptation, and protect their export industries from unilateral Western carbon border taxes. 

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