Environment and Disaster Management › Climate negotiations and finance
हिन्दी — Read in HindiClimate finance, carbon markets and carbon pricing
Climate money and the price of carbon: the funds and goals, green bonds and what may be counted green, and border taxes on carbon. Prelims has asked about carbon markets under Article 6 of the Paris Agreement and about a bond that funds both environmental and social projects.
Foundation note: India's carbon market: the Carbon Credit Trading Scheme
UPSC has asked
- Prelims 2023: carbon markets as a tool against climate change
All 3 articles shown; the 2 that changed from 1 to 30 September 2026 are marked.Show only these
Carbon Border Adjustment Mechanism
Copy link to Carbon Border Adjustment MechanismPrelims and Mains
The Carbon Border Adjustment Mechanism (CBAM) is the European Union's charge on certain imports, paid by buying certificates that track the Union's carbon price.
- It entered its definitive phase in January 2026.
- It covers iron and steel, aluminium, cement, fertilisers, electricity and hydrogen.
- Iron and steel are about 90 per cent of India's exports to the European Union that the mechanism covers.
- It is not the climate logic of the mechanism that developing exporters object to.
The case for
- A carbon price inside the bloc raises costs there, and cheaper imports would otherwise undercut it
- The charge is meant to prevent carbon leakage
The case against
- It is set by one bloc rather than agreed under the United Nations climate process
- It cuts across common but differentiated responsibilities
- Developing exporters, India among them, call it a trade barrier
What changed
23 Sep 2026
- Importers into the European Union start paying from February 2027 for goods shipped in 2026, by buying certificates that track the Union's carbon price.
- The mechanism deducts a carbon price paid at home, but India's carbon market sets intensity targets, so a mill that meets its target pays nothing at home and gets no deduction.
Mains: the charge moves production to Europe without cutting emissions and reverses the flow of climate finance, though the Union's worry about carbon leakage is real.
28 Jun 2026
- The Centre is working on a scheme to absorb 90 per cent of small enterprises' compliance cost.
- An Indian Council for Research on International Economic Relations (ICRIER) paper estimates EU imports of Indian iron and steel could fall about 24 per cent, with fertilisers and aluminium next.
Mains: ICRIER argues the mechanism will hurt India's trade with the EU while having negligible effect on emissions.
See also: Bonn climate talks, SB64
Sovereign green bonds
Copy link to Sovereign green bondsPrelims and Mains
A sovereign green bond is what a government sells when it borrows for a green purpose, such as a solar park, rather than for anything else.
- Whether investors value the promise shows only in what they will pay for it.
- Price and yield move inversely, so heavy demand for a bond lowers the yield the issuer has to pay on it.
- The greenium is that discount measured against a comparable conventional bond of the same issuer and tenure.
- India has issued these bonds since 2022 to 23.
- Insurers drive the demand in India, because green bonds count towards their infrastructure investments.
What changed
15 Aug 2026New
- The 30 year bond of August 2026 drew the highest average greenium since issuance began.
- The discount has held steady across issues rather than fading, which the government reads as a demand signal rather than a saving.
The Hindu, 15 Aug 2026: Sovereign green bonds show a steady "greenium" (opens in a new tab)
UPSC has asked
- Prelims 2026: the bond that funds both environmental and social projects
Green status for nuclear power
Copy link to Green status for nuclear powerPrelims and Mains
Green status for nuclear power would class nuclear energy as green, so that nuclear projects could raise money through green instruments.
- A green label is worth asking for because it lowers the cost of capital, and nothing needs that more than a plant that takes a decade to build and longer to pay back.
- Widening the label raises money for more projects and weakens what the label tells an investor, and those two move against each other.
- Where an activity does not fit, the usual middle path is to call it low carbon or to fund it as transition finance, under conditions.
What changed
2 Sep 2026
- Private nuclear developers asked the National Institution for Transforming India (NITI Aayog) for green energy status, so that nuclear projects could raise money through green instruments.
- The World Bank and the Asian Development Bank are reviewing their own limits on nuclear investment, and their rules on what they will not fund are copied by others.
- The Central Electricity Authority flagged rules still pending under the SHANTI Act, long gestation and scarce manpower.