Centre in final stages of notifying emissions trading scheme

Sectors would be given energy efficiency targets and the companies that were able to exceed these targets would get ‘credits’ or certificates that they could bank or sell to companies that failed to meet the targets 

February 20, 2023 09:49 pm | Updated 11:05 pm IST - New Delhi

For a cleaner future: Generation of solar thermal power is among the activities that would be eligible for trading carbon credits.

For a cleaner future: Generation of solar thermal power is among the activities that would be eligible for trading carbon credits. | Photo Credit: AFP

After the passing of the Energy Conservation (Amendment) Bill last December, the Centre is now in the final stages of notifying an Emissions Trading Scheme (ETS) that would require polluting industries to achieve certain standards of energy efficiency and permit them to ‘trade’ these improvements.

The notification specifying which sectors would be covered and the targets they would be set would be announced latest by June, two officials, affiliated to the Power Ministry and Environment Ministry, separately confirmed to The Hindu on condition of anonymity.

The Bureau of Energy Efficiency (BEE), a Power Ministry body, would be the nodal coordinator of the scheme. Sectors (for example, aluminium, cement, fertilizer) would be given energy efficiency targets and the companies that were able to exceed these targets would get ‘credits’ or certificates that they could bank or sell to companies that failed to meet the targets. Emissions trading schemes, as they are called, are deployed in the European Union and Korea.

Since 2015, the BEE has been running the ‘Perform, Achieve, Trade’ scheme under which 1,078 industries spanning 13 sectors have been getting energy security certificates if they exceeded certain targets. While similar in principle, the credits generated under the forthcoming mechanism would force companies to invest substantially more in deploying alternate, cleaner sources of energy to meet efficiency norms, as they would likely have to meet a higher bar for emission reductions.

One official said that one significant difference in the Indian emissions trading scheme from the ones in Europe or other countries is that companies wouldn’t be required to cut carbon emissions in absolute terms. “The EU is required to cut emissions under the provisions of the United Nations Framework Convention on Climate Change. India doesn’t have an obligation. However, we have committed to reducing the emissions intensity (emissions per unit of GDP) of our GDP by 45% (of 2005 levels) by 2030. So it’s possible for companies (under the Indian emissions trading scheme) when they increase production to emit more carbon and still be more efficient,” the official said.

India has committed to installing facilities to generate nearly 500 GW of electricity from non-fossil sources by 2030 and this will cost at least ₹2.4 trillion according to an estimate from the Central Electricity Authority. “India should have its own emissions trading scheme structure and while we can certainly learn from models in the West, we should ensure that what we do accommodates for our specific needs,” Sanjeev Sanyal, Member, Economic Advisory Council to the Prime Minister, said at a discussion on Monday on carbon markets.

As a precursor to the Indian carbon markets, the Environment Ministry on February 17 listed a range of activities, called greenhouse gas mitigation activities, that would be eligible for trading carbon credits. These include solar thermal power, offshore wind, green hydrogen, compressed biogas and stored renewable energy.

An emissions trading market is different from traditional “carbon credits”, an older scheme, whereby Indian industries installed systems to generate power from renewable energy sources instead of coal, oil and gas and claimed credits that reflected the emissions that were notionally prevented. These credits were sold to exchanges in the European Union where companies were required to offset their emissions with such credits. Many companies undertake voluntary offsets to reflect their embrace of clean technology and bank, as well as trade them. Carbon credits, in theory, reflect actual prevented emissions and energy certificates from ETS-like schemes reflect investments by industry in complying with government regulations on curbing emissions.

“The announcement of the setting up of a carbon credit trading scheme by the Government of India is a pathbreaking one,” Nishtha Singh and Vaibhav Chaturvedi, analysts at the Council for Energy, Environment and Water (CEEW), said in a policy paper on the subject, “Indian stakeholders should view the domestic ETS as an instrument for decarbonisation and domestic climate finance rather than international climate finance.”

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