How Delhi government’s carbon credit plan aims to tackle air pollution, raise revenue

If a company is struggling to meet the emission reduction target for a particular year, it will buy these carbon credits and claim to have met the target.

“The essential principle behind this structure is that decarbonisation is an expensive process. Governments or companies have limited amounts of money that can be spent. For example, it will cost the government more money to buy electric buses than diesel buses for public transit. But electric buses are better for the environment. Carbon trading makes these activities financially viable,” says Vaibhav Chaturvedi, Senior Fellow, Council on Energy, Environment and Water (CEEW).

How do carbon markets function and what is the price of a credit?

Companies or governments may want to buy carbon credits voluntarily as part of their Corporate Social Responsibilities (CSR), or to comply with government regulations. The existence of global, national and sub-national goals for carbon emission reduction means there will be players, like companies, who are struggling to meet their emission standards and will want to buy carbon credits.

There are around 80 carbon trading regimes worldwide, according to the World Bank’s State and Trends of Carbon Pricing 2025 report. While some of these systems are set up by international non-profit organisations, others may be set up by the government. India is currently in the process of setting up its own carbon market.

Private third-party firms, which are accredited by these markets, audit and verify carbon reduction of companies or projects meticulously.
“The value of a carbon credit can vary from $1 to over $100, depending on market dynamics,” a Centre for Science and Environment (CSE) report on carbon markets, authored by Trishant Dev, Deputy Programme Manager, Climate Change at CSE, notes.

The World Bank’s report also highlighted significant growth in carbon pricing, covering 28% of global emissions in 2025, up from just 5% in 2005. Also, revenues worth over $100 billion were raised in 2025 alone, it showed.

What do we know about Delhi government’s policy?

The Delhi government said many of its activities, such as operating electric buses, plantation drives, promoting solar energy and waste management, will be used to generate carbon credits under the new policy. The reduction in emissions through these initiatives will be scientifically measured, registered as carbon credits, and sold in national and international carbon markets to generate revenue.

According to the Environment department, a specialised agency will be selected to handle documentation and registration as per international norms. The model is based on revenue-sharing, with no upfront cost to the government. All proceeds will be deposited in the Consolidated Fund of the State.

“Delhi is one of the pioneers among states to approve such a policy. Maharashtra has approved one such policy four-five months ago. This mechanism creates a direct financial incentive for the government to engage in activities which reduce carbon emissions,” CEEW’s Chaturvedi says.