Context

• Carbon markets are important instruments for reducing greenhouse gas emissions and financing the transition towards a low-carbon economy.
• However, differences in national regulations, accounting methodologies and verification standards have prevented the development of interconnected international markets.
• At the 18th BRICS Summit, held in New Delhi on September 12, 2026, members reiterated their commitment to the BRICS Carbon Markets Partnership.
• India should prioritise developing a common regulatory rulebook rather than immediately establishing a unified trading platform.

Growing Importance of BRICS Carbon Markets

• Eight BRICS members reportedly operate voluntary carbon markets, while Brazil, China, India and Indonesia account for over one-third of registered carbon credit projects worldwide.
• Their domestic compliance systems are also developing. China has expanded its Emissions Trading System (ETS) to steel, cement and aluminium.
• India's Carbon Credit Trading Scheme (CCTS) has notified emission-intensity targets for 490 entities across nine sectors and introduced an offset mechanism.
• Brazil established its Brazilian Greenhouse Gas Emissions Trading System (SBCE) in 2024, based on an absolute emissions cap.
• Despite these developments, national markets remain disconnected because of differences in regulations, accounting procedures and eligibility criteria.
• Common principles are therefore necessary to improve transparency and interoperability.

Divergence and a Common Framework

• Differences in Domestic Carbon Market Structures
  • China and India follow output-based emissions-intensity benchmarks, whereas Brazil is establishing an absolute emissions cap.
  • Their offset-credit eligibility rules also differ. China accepts domestic certified credits, India restricts eligibility to projects initiated after January 1, 2025, and Brazil requires accredited methodologies.
  • The legal status of carbon units varies too. Brazil regulates its market through securities authorities, whereas India facilitates carbon certificate trading through power exchanges under CERC regulations.
  • Consequently, identical emissions reductions represent different legal instruments across jurisdictions.
• Establishing Common Measurement and Verification Standards
  • The first priority should be harmonising Measurement, Reporting and Verification (MRV) systems.
  • Common standards would ensure consistent measurement, independent verification and transparent reporting of emissions reductions.
  • The 2025 BRICS Principles for Fair, Inclusive and Transparent Carbon Accounting provide a foundation through comparable benchmarks and interoperable systems. These principles should be operationalised using ISO 14064 standards while preserving national regulatory autonomy.
• External Pressure from Carbon Border Measures
  • The European Union's Carbon Border Adjustment Mechanism (CBAM) entered its definitive phase in January 2026, while the United Kingdom will follow in January 2027.
  • These mechanisms impose carbon-related costs on imports of steel, aluminium, cement, fertilisers and hydrogen.
  • Recognition of carbon prices paid in exporting countries requires verified evidence.
  • The UK's recognition of India's CCTS in August 2026 demonstrates the importance of accredited verification.
  • Exporters without reliable emissions data risk punitive default values. A common BRICS framework would strengthen collective bargaining and reduce compliance costs.

Necessary Steps to Link Domestic Carbon Projects

• Developing a Common Rulebook
  • A BRICS rulebook should prioritise three areas:
    • Common monitoring standards: Establish consistent emissions-monitoring and reporting procedures, particularly for industries exposed to carbon border adjustments.
    • Mutual recognition of verifiers: Recognise verifiers accredited by members' national accreditation bodies.
    • Harmonised registries: Adopt compatible data fields to facilitate information exchange and prevent duplication.
  • These measures would provide exporters with a common compliance pathway and strengthen BRICS' negotiating position.
  • Credible emissions accounting is essential to challenge unilateral carbon border measures effectively.
• Introducing a Pilot Carbon Credit Exchange
  • The second priority should be a limited pilot exchange involving domestic carbon projects.
  • Article 6.2 of the Paris Agreement provides the legal basis for bilateral transfers of internationally transferred mitigation outcomes, subject to corresponding adjustments.
  • Two or three BRICS members could mutually recognise selected methodologies and permit capped transfers of authorised credits within domestic offset limits.
  • The pilot would identify practical challenges, including corresponding adjustments, financial regulations, legal classification of carbon units and prevention of double counting.
  • Its objective should be institutional learning rather than maximising trading volumes.

The Way Forward: Using Existing Institutions

• The New Development Bank (NDB) could establish a shared registry data facility or purchasing mechanism for pilot carbon units, improving transparency and reducing transaction costs.
• A portion of carbon-transfer proceeds could support climate adaptation financing, giving countries with limited mitigation potential an incentive to participate.
• However, national interests diverge. China's industrial scale could make it a dominant price-setter, sanctions may complicate settlements, and competition in steel and aluminium exports could discourage integration.
• Therefore, full integration of compliance markets is neither realistic nor desirable at present.
• Common MRV standards and limited pilot exchanges offer a practical alternative while preserving national autonomy.

Conclusion

• The BRICS Carbon Markets Partnership offers an opportunity to strengthen climate cooperation among emerging economies.
• Its success requires moving beyond general commitments towards practical institutional arrangements.
• Priorities should include common MRV standards, mutual recognition of verifiers, interoperable registries and pilot carbon exchanges.
• Supported by the New Development Bank, these measures can strengthen domestic markets and collective bargaining capacity.
• Ultimately, a common carbon market rulebook can establish BRICS as a credible force in global climate governance while advancing equitable carbon accounting, climate justice and sustainable development.