Carbon offsets are a mechanism used to mitigate the greenhouse gas emissions that are produced by human activities, such as transportation, manufacturing, and energy production. Carbon offsets are created when a project is implemented to reduce or avoid carbon emissions, and the number of emissions that are avoided or reduced are then sold as offsets. These exist under voluntary programs as well as compliance markets. Voluntary offsets are employed by organizations to offset their emissions and attain their emission reduction targets, if any, while compliance markets are created by the mandatory national, regional, or international carbon reduction regimes. The carbon credits can be traded on a regulated exchange, creating a market-based mechanism for reducing emissions and promoting sustainable development.
This development is significant because it provides a framework for the creation of a domestic carbon market in India. This market has the potential to attract investment, promote innovation, and support the development of sustainable infrastructure in the country. Additionally, a domestic carbon market can help India meet its climate targets under the Paris Agreement and demonstrate its commitment to tackling climate change on a global level.
Indian organizations are a small user of offsets: retire carbon offsets equivalent to 0.1% of total carbon offsets retired globally
Despite the absence of a formal carbon market in India, a growing number of Indian organizations have been actively participating in the carbon markets since the early 2000s. However, the total volume of offsets retired by Indian corporates is much smaller than global volumes. The listed Indian corporates have retired 753,917 tCO2e credits, representing around 0.1% of the total carbon offsets retired globally.
The majority of the offsets procured by Indian corporates serve as a means to accomplish emission reduction targets or advance towards carbon neutrality objectives. The intensification of emission reduction targets among organizations, coupled with the establishment of carbon markets, could lead to an increase in the volume of carbon offsets traded.
Indian companies are not relying on carbon credits to reduce their emissions.
According to data from the carbon registry, more than 20 Indian corporates have been actively involved in purchasing carbon offset. Table 1 contains the list of companies purchasing credits to offsets their emissions.
Among these top listed Indian corporates, Infosys Limited has retired a substantial number of offsets to attain carbon neutrality during the fiscal years 2021 and 2022. It constituted 46% of the total offsets retirements by an Indian organization. Infosys procured these credits from projects focused on energy efficiency and clean fuels. Specifically, the company retired 170,113 offsets in 2021, 1,648 in 2022, and178,016 in 2023, thus fulfilling its carbon neutrality objectives for the aforementioned financial years.
Before 2020, it was only DLF limited which was retiring the bulk of offsets. The company has been active in retiring carbon credits, accounting for approximately 41% of the total carbon credits retired by Indian organizations. The company has consistently retired credits for the years 2016, 2017, 2018, and 2021. DLF Home Developers Limited(subsidiary of DLF Limited) had originated some these credits by investing inrenewable electricity, that were later retired by DLF limited itself.
Similarly, Adani Total Private Limited, wholly owned subsidiary of Adani Total Gas Limited retired 64,286 offsets, which were generated by Adani Green’s Renewable Solar Power Project
ITC Limited retired a total of 19,307 carbon offsets. The company has been actively utilizing carbon offsets from 2020 tostay on track with its climate goals. ITC Hotels, wholly owned subsidiary of ITC Limited has retired 11052 and 5500 carbon credits in 2022 and 2023 respectively to reduce its emissions achieve their emission reduction targets.
TCS has retired 1,531 offsets for its net-zero strategy, most of these offsets were retired by its subsidiary which are operating internationally, such as in Philippines, Belgium, Italy and others.
Although other companies have also made retirements, these are significantly smaller in magnitude, with retirements in multiples of hundreds.
Data variation on volume of carbon credits retired in CDP and in the carbon registries
Companies are reporting their offset usage in their disclosure to the CDP (Carbon Disclosure Project). As companies use the offsets, these also get marked as ‘retired’ (or marked asused) in carbon registries.
An analysis by the ICCAD team shows that the number of offsets retired by a few Indian corporates does not exactly match with registry retirement data. Admittedly, these numbers are small and there is an issue of timing. However, as companies increasingly come under scrutiny by investors and stakeholders, this would be an item to watch for.
The CDP data is only available for the organization up till 31st March, 2022 while the registry data is updated till 19th march 2023.
As per CDP records, Infosys Limited retired 170,113 and 177,719 carbon credits in 2021 and 2022 to achieve carbon neutrality. These numbers tally with the numbers they have released in their carbon neutrality declaration as well.
ITC Limited purchased and retired 5 and 3,243 tonnes of carbon credits in 2021 and 2022 respectively to offset their emissions and meet their climate goals. However, as per the registries, the company has retired 505 and 2,254 offsets in 2021 and 2022 respectively. This might be because offsets made by subsidiaries might not be included in CDP
Marico Limited, is the only company for which the data matched. 550 offsets that the company has procured in 2022, it has retired them later
There is data discrepancy for TCS. As per the CDP report, the company has retired 1,166 carbon credits in 2022 for itsnet zero strategy, however, as per the registry, the company has 1,531 offsets.The suspected reason behind this discrepancy might be that a few of the offsets recorded for TCS in the registry belong to its international subsidiaries operating in Philippines, Belgium, Italy and others countries
Offsets retired by Tech Mahindra Limited were not found in the registry.
Comparison between data reported by companies to the Carbon Disclosure Project and Retirement data in carbon registries
