Indian Carbon Market
As per the TNC submitted to the UNFCCC in December 2023, India has successfully continued to decouple its economic growth from Greenhouse Gas emissions. This has resulted in the reduction of the emission intensity of its Gross Domestic Product (GDP). The details are as follows:
| Period | GHG Inventory year | Reduction in Emission Intensity w.r.t. 2005 levels |
| 2005-2010 | 2010 | 12% |
| 2005-2014 | 2014 | 21% |
| 2005-2016 | 2016 | 24% |
| 2005-2019 | 2019 | 33% |
[TNC: Third National Communication; UNFCC: United Nations Framework Convention for Climate Change]
The Energy Conservation Act, 2001 (52 of 2001) in the year 2022 proposed amendmends to develop the carbon market. Thus, the regulatory framework for the Indian Carbon Market is established under the Energy Conservation Amendment Act, 2022. Clause (w) of section 14 of the EC Act empowers the Central Government, to specify the carbon credit trading scheme. Of course, the government does this in consultation with the Bureau of Energy Efficiency (Bureau)
What is Carbon Credit Trading Scheme (CCTS)?
Based on the above, the Central Government has notified the Carbon Credit Trading Scheme vide notification S.O. 2825(E), dated 28th June 2023, and amendment notification S.O. 5369(E), dated 19th December 2023. The CCTS is expected to contribute to achieving India’s climate goals. It will be in line with the commitments under UNFCCC and its Paris Agreement.
The government will facilitate the achievement of India’s enhanced Nationally Determined Contributions (NDCs) targets. It will do so by developing a robust framework for the Indian Carbon Market (ICM). It plans to decarbonize the Indian economy by pricing the Green House Gas (GHG) emission. This, it plans to achieve through trading of the carbon credit certificates.
CCTS defines the two mechanisms namely; compliance mechanism and offset mechanism. 1. Compliance Mechanism:
The obligated entities shall comply with the prescribed GHG emission intensity reduction norms during each compliance cycle of CCTS. Obligated entities that reduce their GHG emission intensity below the prescribed level will be eligible for issuance of Carbon Credit Certificates.
2. Offset Mechanism:
The non-obligated entities can register their projects for GHG emission reduction, removal, or avoidance to qualify for the issuance of Carbon Credit Certificates. The Carbon Credit Trading Scheme is expected to support India’s climate goals. It will also align with its commitments under the UNFCCC and the Paris Agreement.
The Perform Achieve and Trade (PAT) Scheme
The Perform Achieve and Trade (PAT) Scheme, launched in 2012, is a market-based mechanism designed to enhance energy efficiency in energy-intensive industries by assigning specific energy consumption reduction targets to these industries (referred to as Designated Consumers or DCs). The Government of India has developed a comprehensive transition plan to facilitate a smooth shift of energy-intensive sectors and designated consumers (DCs) from the Perform, Achieve, and Trade (PAT) scheme to the compliance mechanism under the Carbon Credit Trading Scheme (CCTS). This plan ensures continuity, consistency, and alignment with national climate goals while avoiding target duplication. To commence the transition, the Government has identified nine energy-intensive sectors for inclusion under the CCTS: Aluminium, Cement, Steel, Paper, Chlor-Alkali, Fertiliser, Refinery, Petrochemical, and Textile.
MRV Framework
Under the Carbon Credit Trading Scheme (CCTS), the Bureau of Energy Efficiency has developed a detailed procedure for compliance mechanism incorporating a comprehensive Measurement, Reporting, and Verification (MRV) framework. By and large, this framework will ensure accurate, transparent, and credible compliance. The MRV framework’s key elements include the following:
- Target setting
- Monitoring
- Reporting & Verification procedures
- The issuance and trading of Carbon certificates
All things considered, the development process of the MRV guidelines has followed a consultative approach. It includes stakeholder consultations and a draft circulation to the concerned stakeholders. This will culminate in the finalization of the document. Consequently, the finalized MRV framework was published by the Government of India in July 2024.
A critical component of the MRV framework is the verification process, which mandates annual verification of GHG emissions data. At this time, to uphold the credibility of the CCTS, the BEE will accredit Carbon Verification Agencies based on specific eligibility criteria. The Bureau of Energy Efficiency, through extensive stakeholder consultations, has developed the detailed procedures for accreditation eligibility criteria and the accreditation process for Carbon Verification Agencies. It published these procedures in July 2024.
References
http://www.pib.gov.in/Pressreleaseshare.aspx?PRID=2082528
Want to stay informed and inspired? Subscribe to our blog for insightful updates delivered straight to your inbox. Explore our website for a curated collection of reference books, resources, and more – designed to fuel your curiosity and keep you ahead.
Dont miss out on another informative post:
Click on DOWNLOAD for offline reading:
One thought on “India’s Carbon Credit Trading Scheme Explained”