India and Japan are in the process of finalising a joint crediting mechanism, a bilateral framework to share emission reduction credits. This aligns with the countries’ broader climate ambitions and their efforts to build effective carbon markets. A memorandum of cooperation is expected to be signed within the next two months.
Under the JCM, decarbonisation technologies will be deployed in India through Japanese investments, contributing to greenhouse gas reductions and sustainable development under Article 6.2 of the Paris Agreement. Once finalised, carbon credits will be officially registered and tracked. Joint committees will oversee project implementation and verify credit issuance through detailed reporting. The mechanism will help both countries meet their nationally determined contributions (NDCs) under the Paris framework.
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Joint crediting mechanism explained
The JCM is a bilateral carbon offset mechanism that allows Japanese companies to install advanced carbon-reduction technologies in India and, in return, receive carbon credits. These credits can be used to offset their emissions under Japan’s national targets or sold to the Japanese government. Eligible sectors under the joint crediting mechanism include solar thermal energy, green hydrogen, sustainable aviation fuel, and renewable energy with storage, as specified under the Article 6.4 carbon mechanism. However, India should strategically direct these investments toward sectors that are currently underfunded or have high implementation costs.
Originally initiated by Japan, the JCM facilitates the transfer of climate-friendly technologies and technical expertise from developed to developing countries. While this supports sustainable development in host countries, developed nations benefit by outsourcing their emissions reductions, often at a lower cost. The JCM also helps mobilise international finance, reducing the cost burden for the recipient country.
Global footprint and a long courtship
Japan already has bilateral joint crediting mechanism agreements with 11 countries including Costa Rica, Vietnam, Ethiopia, Indonesia, Kenya, and Mongolia. These pacts enable Japan to meet its climate targets by financing emissions reductions abroad. Talks with India on a JCM partnership have been ongoing since 2014, highlighting the complex negotiations involved in such high-stakes climate agreements.
Beyond emissions cuts, the JCM promises to generate jobs in both nations by fostering investments in low-carbon technologies. As both India and Japan intend to count JCM-generated credits towards their respective NDCs, strict protocols must be in place to prevent double counting of emission reductions. The initiative is also likely to deepen India-Japan strategic ties, complementing their collaboration in defence, infrastructure, and economic security as a counterbalance to China’s growing regional influence.
How can India benefit from JCM
Achieving low or zero carbon emissions requires access to technologies that are often expensive or not widely available. For example, generating electricity via coal is cheaper than using solar thermal power or green hydrogen, despite the environmental cost. For a country like India, vulnerable to climate change—adopting such clean technologies is not only essential but urgent. However, these technologies often come with high upfront costs that may exceed what the government can currently fund.
In this context, Japan’s role becomes critical. By subsidising these technologies, Japan helps equalise the cost of clean energy with conventional polluting sources. The ultimate goal is for India to eventually adopt and scale these technologies independently. This makes the JCM a high-stakes and high-impact partnership.
Article 6.2 of the Paris Agreement
The joint crediting mechanism operates under Article 6.2 of the Paris Agreement, which allows countries to voluntarily collaborate on achieving their NDCs. It permits the transfer of Internationally Transferred Mitigation Outcomes (ITMOs)—essentially quantifiable emission reductions—between countries. These transfers must follow stringent accounting rules to avoid double counting. For India and Japan, the share of carbon credits will be determined through mutual agreement under this framework.
The JCM has the potential to transform India’s energy sector by improving the affordability and competitiveness of renewable energy technologies. Coal continues to dominate India’s power mix because of its lower capital cost. But with Japanese subsidies, alternatives like solar thermal plants and energy storage systems could become economically viable, hastening India’s energy transition.
Beyond reducing costs, the JCM promises to drive economic growth by creating skilled jobs. This aligns with India’s twin goals of sustainable development and economic expansion. Japanese companies, meanwhile, gain access to a fast-growing market for clean technologies.
Though exact emissions reduction targets under the India-Japan JCM are yet to be disclosed, the potential is significant. India is the world’s third-largest GHG emitter, largely due to coal and industrial activities. Other JCM partnerships, such as those in Vietnam, have already achieved measurable CO₂ reductions in key sectors. India could expect a similar trajectory by targeting high-emission areas with solutions like green hydrogen and SAF.
However, the success of these projects depends on “additionality”—proof that the emission reductions would not have occurred without JCM support.
Challenges and concerns
Despite its promise, the JCM faces several hurdles. One major challenge is the risk of double counting, where both countries might claim the same emission reductions. This would compromise the integrity of the mechanism and the credibility of their climate targets. Another concern is that Japan might use the JCM to delay stronger domestic climate actions. Critics argue that developed countries should focus on cutting emissions at home first. However, supporters of the mechanism contend that international cooperation through frameworks like the JCM leads to faster and more cost-effective global progress on climate goals.
Long-term sustainability is another critical issue. India must eventually develop the capability to adopt and scale these technologies on its own. This will require not just funding, but also knowledge transfer, training, and infrastructure development. Without such capacity-building, the JCM risks being a short-term fix rather than a foundation for lasting transformation.
If implemented successfully, the India-Japan JCM could serve as a global blueprint for climate cooperation. It has the potential to lower the cost of climate action, accelerate technology transfer, and strengthen diplomatic ties—all while helping both nations move closer to their climate goals.
By aligning strategic interests with sustainability objectives, this partnership can demonstrate how developed and developing countries can collaborate meaningfully to tackle one of the greatest challenges of our time: climate change.