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As the world races to meet its climate goals, the launch of the UN-backed Paris Agreement Credit Mechanism (PACM) at COP28 in 2024 has brought a much-needed shake-up to the global carbon credit system. For India—a country balancing economic growth with climate commitments—PACM presents both an opportunity and a challenge.

Why PACM Is Different—and Important

Unlike private carbon credit programs, the PACM is a globally regulated mechanism under the United Nations Framework, ensuring higher transparency and accountability. Its introduction aims to restore trust in the carbon market, particularly after the failures of the Clean Development Mechanism (CDM) that preceded it.

CDM, launched in 2001, allowed developed countries to offset their emissions by funding emission-reducing projects in developing countries like India. But over time, it became clear that many CDM projects were flawed. A key issue was “additionality”—whether these projects would have happened without carbon finance. In too many cases, the answer was no. For example, wind farms or hydropower projects in India that were already profitable received credits, reducing the legitimacy of climate finance.

The PACM, in contrast, introduces stricter rules and upfront project registration, ensuring that only measurable, real, and verifiable emission reductions are credited. It aims to align carbon trading more closely with the Nationally Determined Contributions (NDCs) of countries like India.

India’s Carbon Market: At a Crossroads

India is one of the largest hosts of CDM projects, with over 1,700 projects historically registered. As the PACM opens its doors, India faces a transition period until the end of 2025 during which old CDM projects can apply for new PACM approval. While this helps maintain market continuity, it also raises red flags.

A recent analysis by the NewClimate Institute warns that over 1,000 legacy projects, many with questionable climate impacts, are rushing to gain PACM approval. These include:

Large hydropower and wind energy projects that would have been built anyway.

Methane capture in landfills, which might not meet the PACM’s updated baseline standards.

Clean cookstove initiatives, long debated for their dubious data on fuelwood savings.


If all such projects receive PACM credits, the market risks being flooded with low-integrity offsets, eroding trust even before the new system fully takes root. This is especially relevant as over 3,500 companies globally (including a rising number in India) have committed to net-zero pathways and are looking for high-quality offsets.

The Way Forward for India

India must tread carefully during this transition. It needs to ensure that only high-integrity CDM projects are migrated into the PACM. This means:

1. Establishing a national-level integrity screening of old CDM projects before recommending them to the UN system.


2. Strengthening MRV (Monitoring, Reporting, and Verification) protocols for emission reductions.


3. Avoiding retroactive credit approvals, a loophole PACM seeks to close.


4. Encouraging new-generation green projects—such as regenerative agriculture, carbon capture, or solar irrigation—rather than resuscitating old legacy assets.



At the same time, PACM offers a strategic opportunity for India to mobilize international climate finance through credible carbon offsets that align with its own sustainable development goals.

Private Sector Implications

For Indian businesses, particularly in high-emission sectors like cement, steel, and transport, PACM provides a credible route to offset unavoidable emissions. But with rising scrutiny, buying “junk” carbon credits is no longer a safe or smart strategy. Companies will need to invest in real emission reductions or partner with credible PACM-aligned projects.

Moreover, Indian startups working in climate tech, renewable energy, and forestry stand to benefit from carbon revenues—provided they meet PACM’s stricter standards. This could spur innovation and drive a cleaner, greener growth path.

Clean Slate or Old Shadow?

PACM represents a clean slate for global carbon markets—but only if it avoids the shadows of the CDM. For India, it’s a moment to reclaim leadership in global climate action, while also ensuring environmental integrity, investor confidence, and developmental justice.

As the 2025 deadline approaches, India must act decisively to prevent a flood of questionable projects and instead build a new carbon market architecture that reflects both climate science and national interest.