OECD Urges Carbon Pricing as Core to Climate Finance Policy in G20 Framework
SDG 13: Climate Action | SDG 17: Partnerships for the Goals
Institutions: Ministry of Finance | Ministry of Environment, Forest and Climate Change
In its October 2025 report to G20 Finance Ministers and Central Bank Governors, the OECD Secretary-General highlights that the Inclusive Forum on Carbon Mitigation Approaches (IFCMA) is helping to build consensus on carbon pricing (e.g. taxes, emissions trading) and border carbon adjustments (BCAs) to align climate goals with trade and equity considerations. The report underscores the need for coordinated policy design to avoid distortions, protect vulnerable countries, and ensure feasibility in implementation.
The report notes that while many jurisdictions are piloting carbon markets, gaps remain in aligning policies across borders, ensuring fairness, and preventing carbon leakage. It calls for capacity building, transparency, and shared instruments (e.g. revenue recycling, adjustment funds) to ease adoption in developing economies. The document also references how carbon mitigation policy must integrate with fiscal, monetary, and trade regimes to be effective and resilient.
For India, the OECD’s focus signals that carbon pricing could become integral in G20 climate-finance frameworks, bringing trade, fiscal, and climate policy closer. India needs to sharpen its tools—carbon market architecture, robust MRV (measurement, reporting, verification), and equity safeguards—to engage credibly in policy dialogues. Coordinating Ministry of Finance, NITI Aayog, Ministry of Environment & Climate Change, and Ministry of Commerce will be vital in designing instruments aligned with India’s just transition imperatives and export sectors’ competitiveness. The discussion on border carbon adjustments also demands strategic preparation given India’s export exposure and industrial base.
What is Carbon Pricing? → Carbon pricing makes emitters pay for the greenhouse gases they produce, either through a carbon tax or a tradeable emissions-permit system. The aim is to reward cleaner technologies and reduce pollution cost-effectively. India is developing its own Carbon Credit Trading Scheme (CCTS) to allow industries to trade carbon credits within a national market.
What is the IFCMA?→ The Inclusive Forum on Carbon Mitigation Approaches (IFCMA) is a G20-mandated platform where participating countries explore harmonised carbon pricing and climate policy tools, with special attention to fairness, economic efficiency, and developing‐country concerns.
Follow the full report here: OECD press (October 2025)