India and Japan have signed Agreement on a Joint Credit Mechanism (JCM) as per Article 6.2 of the Paris Agreement to broaden carbon trading, increase investments and speed up green innovation. The agreement comes amid the global supply chains disruptions, the US tariff increase on Indian products, and the Chinese ban on the export of rare earth minerals, providing India with an alternative to sustainable development and energy security.
Strategic Significance
India through the Ministry of Environment, Forest and Climate Change and the Government of Japan signed the agreement. Together, the two countries agreed on long-term agreement worth Y=10 trillion (6 trillion) in AI, semiconductors, defence, and in critical minerals. The US withdrawal of the Paris Agreement will strengthen the ambitions of India to become a manufacturing and clean technology powerhouse due to its increased relations with Japan.
Uncommon Earth Chain of Command.
The 2025 export ban of the major medium and heavy rare earth elements- samarium, terbium, and gadolinium- by China has revealed weak links in the worldwide supply chains. Even though Beijing has since relaxed the ban on permanent magnets as far as India is concerned, the incident highlighted the reliance of India on Chinese minerals. India is already encouraging the processing and production of rare earth domestically, but it will be a long time before a stable ecosystem is established.
Carbon Trading and Finance
JCM presents bilateral carbon credit trading framework and allows reduction of emissions by use of technology transfer and joint projects. It empowers climate financing alternatives in India when the global negotiations have stalled. The scheme does coincide with the Carbon Credit Trading Scheme (2023) in India and will help it achieve its Net Zero 2070 goal.
Relevance to COP30
The JCM puts a strong emphasis on bilateral collaboration to support multilateral climate action with COP30 in Belem, Brazil. The India-Japan initiative is a viable example of transparent and effective carbon markets as only 23 countries have submitted updated NDCs.
Outlook
It is hoped that the JCM will redirect Japanese investment to the Indian decarbonisation initiatives, improve energy security, and be able to build green supply chains. Experts state that it might become a template to be followed by other countries in demonstrating how strategic collaboration can reconcile economic sustainability and climate accountability.
Month: Current Affairs - September 03, 2025
Category: current affairs daily