India mulls bilateral deals for green hydrogen-linked carbon credits

Any agreement will see overseas companies or financial agencies signing investment and purchase deals with Indian green hydrogen makers, sources said.

ia is considering bilateral agreements with countries such as Japan to allow them to use carbon credits linked to green hydrogen production in India in exchange for investment and purchase deals, two government sources and one industry source told Reuters.

New Delhi this year approved a Rs 17,490 crore ($2.13 billion) incentive plan to promote green hydrogen in a bid to cut carbon dioxide emissions and become a major exporter in the sector.

Indian companies such as Reliance Industries, Indian Oil and Adani Enterprises have big plans for green hydrogen, a fuel generated using renewable energy.

Read | Govt targeting 5 MT of green hydrogen production by 2030: FM

Trading in carbon credits - earned by projects for reduction of greenhouse gases and each equivalent to one tonne of carbon dioxide - can bring in more investments and assured offtake to India, said the sources, all of whom declined to be named as the discussions are not public.

Any agreements will see overseas companies or financial agencies signing investment and purchase deals with Indian green hydrogen makers, the sources said, adding that India is already in talks with Japan.

On March 17, Japan and India signed a preliminary agreement to establish a joint crediting system (JCM) for decarbonisation under Article 6 of the Paris Agreement, which is a legally binding international treaty on climate change, according to a document seen by Reuters.

Article 6 provides for sharing of carbon credits between countries and private companies. This would allow buyers of green hydrogen to also get carbon emissions credit for green hydrogen production, which would otherwise be credited to the producers.

Japan already has agreements with 26 countries including Bangladesh, Ethiopia, Kenya, Indonesia and Saudi Arabia.

The Indian ministries of environment, renewable energy and external affairs have held discussions on the proposed carbon-trading agreements, said the sources. The government has spoken with the industry too ahead of a three-day international summit on green hydrogen on Wednesday in New Delhi, they said.

The three ministries did not respond to emails seeking comment. Japan's Indian embassy said their response might be delayed.

Reuters could not immediately determine the other countries India was in talks with.

Read | Adani Group puts green hydrogen project on hold; to resume after 2026

"The Global North's capacity and technology, combined with the Global South's vast potential for green development, can lead to impactful climate action," said Shekhar Dutt, director general of Indian industry body Solar Power Developers Association.

The body this month wrote to Prime Minister Narendra Modi seeking measures to leverage provisions of international treaties and commitments from developed nations to better compete with the US green hydrogen industry, which has far more government backing.

Dutt said India could benefit from the European Union's target of importing 10 million tonnes of green hydrogen by 2030 by leveraging Article 6 of the Paris Agreement.