CCTS

Global Carbon Markets & Trading Explained

February 17, 2025

Over the past six months, the world has witnessed a rapid expansion of carbon markets. Countries such as India, Saudi Arabia, Pakistan, UAE, and Vietnam have introduced their own carbon credit trading schemes, signalling a collective shift towards market-based mechanisms to tackle climate change. Additionally, the United Nations (UN) launched its global carbon market under Articles 6.2 and 6.4 of the Paris Agreement at COP29 in Baku, standardizing the international trade of carbon credits.

Historically, the European Union (EU) pioneered the carbon trading model with the launch of the EU Emissions Trading System (EU ETS) in 2005. However, as climate commitments intensify, emerging economies are now stepping up with their own compliance and voluntary carbon trading mechanisms.

This blog explores the evolving landscape of carbon markets, examining how various countries are structuring their emissions trading systems and how businesses, particularly steel companies, can leverage platforms like sentra.world to optimize their participation in carbon markets.

In this blog, we will explore:

How is India’s Carbon Credit Trading Scheme (CCTS) Transforming the Market?

India has emerged as a major player in the global carbon market by launching its Carbon Credit Trading Scheme (CCTS), administered by the Bureau of Energy Efficiency (BEE) under the Energy Conservation Act, 2001.

Key Features of India’s Carbon Market:

Mandatory Compliance Mechanism: The scheme enforces emission reduction targets for designated industries, which must either reduce emissions or purchase carbon credits to comply. This encourages industrial entities to invest in cleaner technologies and energy efficiency measures to meet regulatory requirements.
Sectoral Scope: Includes power, steel, cement, and oil refineries, sectors responsible for the majority of emissions in India. These industries are key contributors to India’s carbon footprint and are required to participate in the trading scheme.
Carbon Credit Certificates (CCCs): Companies earn Carbon Credit Certificates (CCC) for exceeding their reduction targets and can trade these on a regulated market. This creates an economic incentive for businesses to invest in emission reduction projects.
Regulatory Oversight: The National Steering Committee for the Indian Carbon Market (NSC-ICM) ensures alignment with India’s Nationally Determined Contributions (NDCs). This ensures consistency with India’s climate commitments under the Paris Agreement.

Why is India’s Carbon Market Important?

Mobilizes New Investments: It creates a demand-driven carbon trading system, allowing companies to monetize their emission reductions and attract investment in green projects.
Reduces Compliance Burdens: Businesses can leverage automated reporting tools to comply with national regulations efficiently, reducing administrative complexity and improving transparency.

What is Saudi Arabia’s Greenhouse Gas Crediting & Offsetting Mechanism (GCOM)?

Saudi Arabia launched its Greenhouse Gas Crediting & Offsetting Mechanism (GCOM) during COP29 Baku, as part of its Vision 2030 strategy to diversify its economy and commit to net-zero targets.

Key Features of Saudi Arabia’s Carbon Market:

Voluntary & Compliance Markets: Both corporate entities and the government can trade and offset carbon credits, allowing for flexibility in achieving emissions targets.
Integration with Article 6 of the Paris Agreement: Allows for Internationally Transferred Mitigation Outcomes (ITMOs), enabling global trade of Saudi carbon credits, which strengthens Saudi Arabia’s position in international carbon markets.
Sector Coverage: Focuses on hydrocarbons, energy efficiency, and industrial decarbonisation, ensuring that major polluting sectors take responsibility for reducing emissions.
Digital Registry: A centralized GCOM registry ensures transparency and prevents double-counting, making the system more credible for international investors.

Why is Saudi Arabia’s Carbon Market Important?

First Major Oil Economy to Embrace Carbon Trading: This signals a paradigm shift in how fossil-fuel economies approach decarbonisation, setting an example for other oil-producing nations.
Attracts International Investors: The high-quality credits generated will be attractive for global carbon markets, positioning Saudi Arabia as a leader in the transition to a low-carbon economy.

How is Pakistan Building its National Carbon Market?

Pakistan, despite being a lower emitter historically, has launched an ambitious National Carbon Market Policy in 2024, focusing on economic incentives for emissions reductions.

Key Features of Pakistan’s Carbon Market:

Dual Mechanisms: Both voluntary and compliance markets are being established, allowing different types of participants to trade carbon credits.
IT-Based Trading System: Digital platforms will handle transactions transparently, ensuring accuracy and ease of participation.
Sectoral Focus: Includes agriculture, waste management, forestry, and industry, promoting sustainable practices across multiple economic areas.
Equitable Benefit Sharing: Ensures that local communities benefit from credit trading, fostering socio-economic growth alongside environmental progress.

Why is Pakistan’s Carbon Market Important?

Boosts Economic Growth: Unlocks new revenue streams through international carbon trading, helping industries gain financial benefits from sustainability efforts.
Enhances Climate Resilience: Helps fund decarbonisation projects in energy and agriculture, reducing long-term climate risks.

How is the UAE’s National Carbon Market Transforming Sustainability?

The UAE has introduced the National Register for Carbon Credits under Cabinet Resolution No. 67 (2024). This resolution outlines a regulatory framework for carbon credit registration, trading, and compliance for high-emission industries.

Key Features of UAE’s Carbon Market:

Mandatory Compliance for Heavy Emitters: Entities emitting over 500,000 metric tons of CO₂ annually must participate in the trading scheme.
Trading Platform: The Securities and Commodities Authority (SCA) oversees the exchange of carbon credits to maintain market integrity.
Integration with Global Markets: The UAE’s carbon credits align with Article 6 of the Paris Agreement, facilitating international trade and compliance.
Carbon Capture & Storage (CCS): Encourages direct air capture and sequestration projects, promoting innovation in climate technology.
Sectoral Inclusion: The market includes power, manufacturing, aviation, and real estate, ensuring a broad impact on emissions reductions.

Why is UAE’s Carbon Market Important?

Positions UAE as a Carbon Trading Hub: With its strategic location and financial infrastructure, UAE is set to become a regional center for carbon credit trading.
Enables Corporate Sustainability: The program ensures businesses comply with emissions targets while maintaining economic growth.

How is Vietnam Developing its Carbon Market?

Vietnam took a major step forward in carbon trading with Decision No. 232/QD-TTg, approved on January 24, 2025. This decision aims to establish a regulated carbon market to support Vietnam’s net-zero commitment by 2050.

Vietnam’s Carbon Market Roadmap:

Pre-2025 (Legal & Infrastructure Development):
- Establishing the legal framework for carbon credit trading and emissions quotas.
- Developing monitoring and verification systems.
2025-2028 (Pilot Phase):
- Conducting pilot trading of greenhouse gas emission quotas and carbon credits.
- Building capacity among corporations and industries.
2029 Onwards (Full Launch):
- Operationalizing domestic carbon trading platforms.
- Enabling international trade of credits and aligning with regional markets.

Key Features of Vietnam’s Carbon Market:

Emission Quotas & Carbon Credits: Regulated industries receive GHG emission allowances, with trading mechanisms for excess and deficit emissions.
Market-Based Flexibility: Businesses can sell surplus allowances or purchase additional credits based on their carbon footprint.
Hanoi Stock Exchange (HNX) as Market Operator: The exchange will oversee transactions, ensuring transparency and efficiency.

Why is Vietnam’s Carbon Market Important?

Strengthens Economic Competitiveness: The market helps local businesses align with international carbon pricing standards.
Attracts Foreign Investment: Establishing a trusted carbon credit system makes Vietnam a more attractive market for green investments.

How is the UN’s Global Carbon Market Reshaping Carbon Trading?

At COP29 in Baku, the United Nations launched its global carbon market framework under Articles 6.2 and 6.4 of the Paris Climate Agreement.

Key Features:

Article 6.2 Mechanism: Enables bilateral carbon trading agreements between countries.
Article 6.4 Mechanism: Establishes a centralized UN-supervised carbon credit registry for transparent global trading.
Prevention of Double Counting: Ensures that credits are uniquely accounted for, preventing over-claiming of emissions reductions.
Standardized Verification: All credits must adhere to rigorous verification protocols, ensuring credibility and additionality.

Why is the UN’s Carbon Market Important?

Creates a Universal Carbon Pricing System: The global market harmonizes carbon pricing, making cross-border trading more efficient.
Encourages Developing Countries to Participate: The mechanism provides financial incentives for developing nations to reduce emissions while generating revenue from carbon credits.

How can sentra.world Empower Steel Companies in Carbon Credit Trading?

Steel manufacturing is one of the most carbon-intensive industries, facing rising regulatory pressure to reduce emissions. sentra.world, a SaaS platform, provides comprehensive tools to help steel companies navigate carbon credit trading efficiently.

sentra.world’s Key Offerings:

GHG Measurement: Accurately tracks Scope 1, 2, and 3 emissions, ensuring compliance with global standards.
Automated Compliance Report Generation: Simplifies regulatory reporting, reducing administrative burdens for companies.
GHG & Operations Tracking Dashboard: Provides real-time emissions tracking, allowing companies to adjust strategies proactively.
Net-Zero Planning & Financial Modeling: Offers simulation tools to model the cost-benefit impact of carbon reduction strategies.

How sentra.world plays a crucial role?

By integrating automated compliance, real-time tracking, and strategic forecasting, sentra.world enables steel companies to:

Meet national and global compliance standards.
Optimize carbon credit trading strategies.
Unlock new revenue streams from carbon credits.
Accelerate progress toward net-zero emissions.

Conclusion: The Future of Carbon Markets

The expansion of carbon credit trading across the globe marks a historic shift in climate policy. The emergence of regional and international carbon markets is enabling businesses and governments to tackle emissions reduction in a structured and cost-effective manner.

As more countries establish their trading frameworks, carbon pricing will become a fundamental pillar of international trade and finance. Businesses must adapt leverage platforms, like sentra.calculus, to streamline compliance, optimize emissions reductions, and capitalize on carbon credit opportunities.

With the UN global carbon market now operational, carbon pricing is set to shape the future of global trade, incentivizing sustainable innovation and accelerating the net-zero transition worldwide.