Last week saw a flurry of agreements between two countries on the opposite spectrum of current geopolitical events. Japan and India might find themselves against each other in the bigger picture of a world shifting towards multipolarity but when it comes to carbon, the two countries are definitely on the same page.
The pair signed an agreemenet formalized a joint credit mechanism (JCM) under the Paris Agreement, paving the way for bilateral carbon trading and investment in low-carbon technologies. At the same time,
The credits generated through JCM projects will be eligible for international trading under Article 6.2 of the Paris Agreement, creating new economic opportunities without compromising India’s nationally determined contributions.
Japan and India provide strong Article 6.2 signal
India and Japan have The accord, signed last week by India’s Environment Ministry and Japan’s government, falls under Article 6.2 of the UN climate pact and comes ahead of COP30 in Brazil this November.
Analysts say the JCM could serve as a model for advancing climate finance and technology transfer at a time when multilateral efforts remain gridlocked. Success, however, depends on the timely creation of joint regulations for trading. If implemented effectively, the partnership could showcase how bilateral mechanisms complement global climate frameworks while strengthening resilience across the Indo-Pacific.
Keisuke Kimura from exroad, a carbon credit and ETS information service, highlights some of the risks going forward: “The JCM under Article 6.2 of the Paris Agreement requires “corresponding adjustments” between the two countries. Two types of risks can be envisaged here. First is the possibility that negotiations on the allocation of generated credits may take time. India has its own emission reduction targets and plans to operate a domestic CCTS (carbon credit trading system), so it is expected to demand an appropriate share.
As a result, negotiations may face difficulties. The second is operational risk. Specifically, there is the challenge of whether reporting to the UN—such as initial reports and BTRs (Biennial Transparency Reports)—can be carried out properly. On this point, Japan may need to provide support to India, including capacity building.”
He also points out the ambitious targets of the Ministry of Environment, which has set the goal of having “100 million tons by 2030 and 200 million tons by 2040” for JCM credit generation.
“But achieving these levels will require a significant expansion of projects. Considering such a situation, the signing of the bilateral agreement with India is highly significant in that India could become a new supply source of JCM credits.
In addition, on August 29 the Ministry announced a revised version of its “Basic Strategy for Overseas Deployment of Environmental Infrastructure,” indicating a policy focus on exporting environmental infrastructure. Since the rollout of the JCM using Japan’s infrastructure technologies also carries industrial policy implications, the partnership with India can be positively evaluated from that perspective as well,” Kimura says.
Carbon capture, biofuels and hydrogen collaboration
The two countries also pledged to broaden collaboration in clean energy, with an emphasis on carbon capture, biofuels, green chemicals, and advanced technologies.
The agreement came during the latest ministerial-level India–Japan Energy Dialogue, held virtually on Monday and co-chaired by India’s Power Minister Manohar Lal and Japan’s Economy and Trade Minister Muto Yoji.
The governments reaffirmed their shared priorities of energy security, low-carbon growth, and climate resilience, highlighting progress achieved under the Japan-India Clean Energy Partnership. Officials from India’s power, renewable, oil, and coal ministries outlined ongoing projects and future cooperation in hydrogen, ammonia, efficiency, and renewables.
On top of this, there was also an agreement to establish a cross-border supply chain for clean hydrogen and ammonia, supported by shared standards, carbon credit mechanisms under ITMOs, and subsidy schemes modeled on contracts-for-difference.
The partnership envisions scaling up exports from India to Japan between 2030 and 2040, anchored in verified low-carbon benchmarks and harmonized market structures.
All three initiatives arrive at a delicate moment for India, facing U.S. tariffs on exports and supply chain risks following China’s rare earth restrictions. Japanese investment is expected to provide an alternative lifeline, supporting India’s manufacturing ambitions, critical mineral security, and clean energy transition.
