What the BRICS carbon market partnership needs

Why in the News

The New Delhi Declaration of the 18th BRICS Summit committed members to implementing the memorandum on the BRICS Carbon Markets Partnership. It sets no trading framework, targets or timeline. With India’s BRICS presidency in its final quarter, the partnership needs a common rulebook more than a trading platform.

What is the BRICS Carbon Markets Partnership?

1. Carbon market: A system that turns each tonne of emissions cut into a sellable carbon credit. It works like a quota, where a firm under its limit sells unused room to one over it.
2. Modest scope: The memorandum covers only capacity-building and experience-sharing. The Rio summit acknowledged it in 2025.
3. Weight of the members: Eight members reportedly run voluntary markets. Brazil, China, India and Indonesia host over a third of the world’s registered carbon credit projects.
4. The takeaway: BRICS members generate many of the world’s carbon credits but share no rules for valuing them.

Why are BRICS carbon markets fragmented?

1. Unlinked national systems: China’s emissions trading system has added steel, cement and aluminium. India’s Carbon Credit Trading Scheme (CCTS) covers 490 entities in nine sectors. None is linked to another.
2. Different caps: China and India use output-based intensity benchmarks, meaning emissions allowed per unit produced. Brazil’s 2024 law sets an absolute cap on total emissions under cap-and-trade.
3. Inward-looking offset rules: Each market accepts only its own credits as offsets against a firm’s limit:
   • China, only China Certified Emission Reduction credits;
   • India, only exclusive projects begun after 1 January 2025;
   • Brazil, only methodologies accredited by a body not yet constituted.
4. Different legal status: Brazil’s securities regulator oversees its market. Indian certificates trade on power exchanges under Central Electricity Regulatory Commission rules, so one tonne differs legally by country.

Why does Europe’s border carbon charge make a rulebook urgent?

1. Carbon Border Adjustment Mechanism (CBAM): The European Union’s carbon charge on imports of steel, aluminium, cement, fertiliser and hydrogen entered its definitive phase in January 2026. The United Kingdom (UK) follows in January 2027.
2. Credit only with proof: Both credit carbon prices paid at origin only with verified evidence. Exporters without verified data face punitive default values.
3. Unilateral recognition: The UK unilaterally recognised India’s CCTS in August 2026. Exporters claiming relief need a form from an ISO 14065-accredited verifier.
4. Objection without a standard: The Declaration calls the CBAM unilateral and discriminatory, yet omits BRICS’s 2025 Principles for Fair, Inclusive and Transparent Carbon Accounting, the verifiable standard an objection needs.

What should a BRICS rulebook do first?

1. Common MRV: A shared system of measurement, reporting and verification (MRV), the checks proving a tonne was cut, should come first. It would:
   • set monitoring rules consistent with ISO 14064 for exposed sectors;
   • mutually recognise verifiers accredited by members’ national bodies;
   • harmonise registry data fields.
2. Pilot under Article 6.2: Two or three members could trade capped volumes under Article 6.2 of the Paris Agreement. Corresponding adjustments ensure each cut counts once. Eg. India’s Joint Crediting Mechanism with Japan.
3. Pilot frictions: Cross-border payment for units raises capital account issues for the BRICS Payment Task Force. Registries must share serial numbers to stop double issuance.
4. Existing institutions: The New Development Bank could host a shared registry or purchasing facility. Transfer proceeds could part-fund adaptation, as the Article 6.4 mechanism does.

Challenges

1. China as price-setter: China’s scale would make it the price-setter in any shared market.
2. Sanctions: Sanctions on some members complicate settlement.
3. Export rivalry: Several members compete in steel and aluminium exports, sectors exposed to border carbon charges.
4. Full linkage premature: Full linkage of members’ compliance markets is neither likely nor desirable yet.

Way Forward

1. Use the final quarter: India should table common monitoring and verification rules before its presidency ends, since China takes the chair in 2027.
2. Revive the 2025 Principles: Members should restate the accounting principles in their next joint text.
3. Named owners for frictions: Assign each pilot friction to a named BRICS body with a deadline.

Conclusion

BRICS cannot yet build a linked carbon market, but shared accounting is within its reach. The marker to watch is whether India’s presidency ends with common accounting rules and a pilot, or with capacity-building alone.

About BRICS

1. What it is: An association of 11 large non-Western economies with no treaty or secretariat, so nothing it agrees binds a member.
2. Decision rule: Every document needs every member’s assent, so BRICS itself issues only declarations.
3. Permanent bodies: The New Development Bank and the Contingent Reserve Arrangement are its only permanent institutions.

Matching Previous Year Question

“[2025] Consider the following statements: Statement I: Article 6 of the Paris Agreement on climate change is frequently discussed in global discussions on sustainable development and climate change. Statement II: Article 6 of the Paris Agreement on climate change sets out the principles of carbon markets. Statement III: Article 6 of the Paris Agreement on climate change intends to promote inter-country non-market strategies to reach their climate targets. Which one of the following is correct in respect of the above statements? (a) Both Statement II and Statement III are correct and both of them explain Statement I (b) Both Statement II and Statement III are correct but only one of them explains Statement I (c) Only one of the Statements II and III is correct and that explains Statement I (d) Neither Statement II nor Statement III is correct ANSWER: (a)”