Carbon markets have emerged as critical instruments in the global effort to reduce greenhouse gas emissions by assigning economic value to carbon, incentivizing reductions, and fostering innovation in clean energy. This research paper investigates the evolution and shaping of carbon markets within the Indian context, emphasizing their role in addressing climate change through economic mechanisms. It begins by outlining the global landscape of carbon markets, drawing on data from the World Bank, the Bureau of Energy Efficiency (BEE), and the United Nations Framework Convention on Climate Change (UNFCCC). The study traces India’s journey from participation in international frameworks like the Clean Development Mechanism (CDM) to the establishment of domestic initiatives such as the Perform, Achieve, and Trade (PAT) scheme and the Renewable Energy Certificate (REC) scheme. It highlights the historical context of climate change as a political issue, tracing significant milestones from early carbon pricing mechanisms to the introduction of the Carbon Credit Trading Scheme (CCTS). Ultimately, this work aims to position India as a crucial player in global carbon trading while aligning with its nationally determined contributions (NDCs), offering insights into its strategic approach to carbon pricing and market regulation, building from its past experiences in domestic compliance and international voluntary mechanisms. The paper discusses challenges faced in implementing these mechanisms, including market fluctuations and regulatory hurdles, and provides recommendations for enhancing the effectiveness of India's carbon market (ICM). By examining both domestic and global perspectives, this research underscores the significance of ICM in contributing to sustainable economic growth and addressing climate change on a global scale.