Centre approves formation of India's first domestic regulated carbon market

The union government, through a gazette notification on Friday, approved the formation of India’s first domestic regulated carbon market.

The ‘Carbon Credit Trading Scheme, 2023’ first announced under the Energy Conservation Act, aims to set up a carbon credit trading market in the country.

Drafted by the Bureau of Energy Efficiency, a wholly owned subsidiary of the ministry of power, the scheme would entail formation of a “National Steering Committee, a technical committee, an Accredited Carbon Verification Agency and the Central Electricity Regulatory Commission (CERC) as the carbon market regulator. The Grid Controller of India will be the registry for the Indian carbon market.

 

The steering committee would be responsible for making the regulations, procedures and guidelines for the functioning of the carbon market. The technical committee will be responsible for compliance of the said rules and regulations. The Bureau has entrusted the existing power exchanges for the carbon credit certificate trading.

Any project or entity which saves on emissions can issue carbon credit against their savings. These are usually energy efficiency, renewable energy and sustainable agriculture projects. These credits can be bought by an entity which is a carbon emitter. A carbon credit allows its owner to emit that certain amount of carbon dioxide or other greenhouse gases. One credit is equivalent to one ton of carbon dioxide or the equivalent in other greenhouse gases.
 

The notification however has not specified the activities which would be eligible under the carbon trading scheme. “The Ministry of Power, would recommend the notification of greenhouse gases emission intensity targets to the Ministry of Environment, Forest and Climate Change (MoEFCC). The obligated entities shall be required to achieve greenhouse gases emission intensity in accordance with the targets. The obligated entities shall also be required to meet any other targets such as use of non-fossil energy consumption or specific energy consumption as may be notified by the Ministry of Power under the Act as amended from time to time,” said the notification.

Sector experts said the notification pertains to only the domestic market which will be regulated under the law. There are no details with regards to the carbon expert market and voluntary carbon credit space.

Industry executives said the voluntary carbon credit market in India could touch $200 billion by 2030 from the current $2 billion. While being one of the largest carbon credit exporters to the world, India itself doesn’t have a carbon market. While there are a handful of carbon offsetting platforms offering carbon credits, there hasn’t been a regulated market till yet.

Manish Dabkara, Chairman and MD, EKI Energy Services ltd said, they will be closely monitoring the developments and implementation of the CCTS. BSE-listed EKI is a leading carbon credit developer and supplier in India, and claims to have 90 per cent share credits originating from the country.

“We hope that the government will develop the market with a proactive compliance and enforcement mechanism which will help to a reasonable price discovery and a vibrant operational domestic emission trading market. Such a market mobilization will ensure the encouragement of investors for long-term investment in carbon reduction technologies, projects, and processes, towards an accelerated decarbonization of the country's economy,” Dabkara said.