Carbon Credit Trading Scheme: Driving India’s Green Transition

The Government of India has introduced the Carbon Credit Trading Scheme, 2023, a significant step towards achieving its climate goals and promoting a low-carbon economy. This scheme, notified by the Ministry of Power, establishes a framework for trading carbon credits, incentivizing industries to reduce their greenhouse gas emissions and contributing to India’s sustainable development.

Objectives of the Carbon Credit Trading Scheme

The primary objectives of this scheme are:

• Emission Reduction: To reduce greenhouse gas emissions across various sectors of the Indian economy.

• Market-Based Mechanism: To create a market-based system for pricing carbon emissions, encouraging industries to adopt cleaner technologies.

• Incentivize Efficiency: To incentivize industries to improve energy efficiency and adopt renewable energy sources.

• Promote Sustainability: To foster sustainable practices and contribute to India’s commitment to climate action.

• National Framework: To establish a robust national framework for trading carbon credits.

Key Components of the Scheme

The scheme establishes several key components for its functioning:

1. Compliance Mechanism: Obligated entities, as notified by the central government, will have to comply with greenhouse gas emission norms.

2. Carbon Credits: A carbon credit represents a reduction or removal or avoidance of greenhouse gas emissions, equivalent to one ton of carbon dioxide equivalent (tCO2e).

3. Carbon Credit Certificates: These certificates are issued to obligated entities that achieve emission reductions exceeding their targets.

4. Indian Carbon Market Infrastructure: A national infrastructure is established for trading carbon credit certificates, enabling price discovery for greenhouse gas emissions.

5. Meta-Registry: A national greenhouse gas registry that manages data and facilitates linkages with other national and international registries.

6. Obligated Entities: Registered entities notified under the compliance mechanism that have to meet emission reduction targets.

7. Non-Obligated Entities: Registered entities that can voluntarily purchase carbon credit certificates.

8. Power Exchange: An electronic trading platform for trading carbon credit certificates.

Regulatory and Governance Framework

• National Steering Committee: A national steering committee, led by the Secretary of the Ministry of Power, will oversee the governance and functioning of the Indian carbon market.

• Bureau of Energy Efficiency (BEE): The BEE serves as the administrator for the Indian carbon market, responsible for implementing the scheme, developing procedures, and issuing carbon credit certificates.

• Central Electricity Regulatory Commission (CERC): The CERC acts as the regulator for trading activities under the Indian carbon market.

Functions of the National Steering Committee

The National Steering Committee is responsible for:

• Recommending procedures for institutionalizing the Indian carbon market.

• Formulating rules and regulations for the market’s functioning.

• Recommending emission targets for obligated entities.

• Developing guidelines for trading carbon credits outside India.

• Recommending the issuance of carbon credit certificates.

• Overseeing the functioning of the Indian carbon market.

Functions of the Bureau of Energy Efficiency (BEE)

The BEE, as the administrator, is responsible for:

• Identifying sectors and their potential for emission reduction.

• Developing trajectories and targets for obligated entities.

• Issuing carbon credit certificates.

• Developing market stability mechanisms for carbon credits.

• Accrediting carbon verification agencies.

• Maintaining a secure database.

Functions of the Registry

The Grid Controller of India Limited acts as the registry for the Indian carbon market, responsible for:

• Complying with directions from the Bureau.

• Registering obligated and non-obligated entities.

• Maintaining secure databases and records of transactions.

• Sharing transaction records with Power Exchanges and the Bureau.

Trading of Carbon Credit Certificates

• Power Exchanges are registered by the Commission to facilitate the trading of carbon credit certificates.

• Power Exchanges must seek approval from the Commission for their bylaws and rules for trading.

• Power Exchanges are responsible for trading carbon credit certificates according to regulations.

Compliance Mechanism and Targets

• The Ministry of Power will decide which sectors and obligated entities are to be covered under the compliance mechanism.

• The Bureau will undertake studies to recommend emission intensity targets for obligated entities.

• The Ministry of Environment, Forest and Climate Change will notify these targets under the Environment Protection Act, 1986.

Detailed Procedures and Guidelines

The scheme outlines that detailed procedures will be developed for:

• Issuance of carbon credit certificates.

• Validity of carbon credit certificates.

• Floor and forbearance prices.

• Requirements, formats, and timelines for submissions.

• Monitoring, reporting, and verification.

Conclusion

The Carbon Credit Trading Scheme, 2023, is a landmark policy initiative that will incentivize industries to reduce their carbon footprint and contribute to India’s climate goals. By creating a market-based mechanism for trading carbon credits, the scheme promotes innovation, efficiency, and sustainability, paving the way for a greener and more resilient Indian economy.