On June 28, 2023, the Ministry of Power in India announced the implementation of a groundbreaking initiative, the Carbon Credit Trading Scheme, aimed at mitigating greenhouse gas emissions and promoting sustainable practices. This scheme, based on the powers conferred by clause (w) of section 14 of the Energy Conservation Act, 2001, has been formulated in consultation with the Bureau of Energy Efficiency.
The Carbon Credit Trading Scheme, 2023, is a comprehensive framework that establishes a national market for carbon credits in India. Under this scheme, a carbon credit is defined as a value assigned to the reduction, removal, or avoidance of greenhouse gas emissions, equivalent to one ton of carbon dioxide equivalent (tCO2e). This scheme aims to incentivize businesses and organizations to adopt cleaner technologies and implement measures to reduce their carbon footprint.
The Ministry of Power, in collaboration with the National Steering Committee for Indian Carbon Market, will oversee the governance and functioning of the Indian carbon market. The National Steering Committee comprises high-level representatives from various government ministries, including Power, Environment, Finance, Niti Aayog, New and Renewable Energy, Steel, Coal, Chemicals and Fertilizers, Petroleum and Natural Gas, and Agriculture and Farmers Welfare.
The Bureau of Energy Efficiency has been designated as the administrator of the Indian carbon market. The Bureau will identify sectors with potential for greenhouse gas emissions reduction, develop emission targets for obligated entities, and issue carbon credit certificates based on the recommendations of the National Steering Committee. Furthermore, the Bureau will accredit carbon verification agencies, establish market stability mechanisms, and maintain the necessary IT infrastructure for the functioning of the market.
The trading of carbon credit certificates will be regulated by the Central Electricity Regulatory Commission, ensuring transparency and safeguarding the interests of buyers and sellers. Power exchanges registered with the Commission will facilitate the trading activities within the Indian carbon market. The Commission will also provide market oversight and take preventive and corrective actions to prevent fraud.
Obligated entities, as determined by the Ministry of Power, will be required to meet greenhouse gas emission intensity targets set by the Ministry of Environment, Forest and Climate Change. Entities that exceed their targets will be issued carbon credit certificates, while those falling short will be able to purchase carbon credits from the Indian carbon market.
To ensure compliance and effective implementation, the detailed procedures for the Indian carbon market will be developed by the National Steering Committee and other relevant authorities. These procedures will cover submissions, monitoring, reporting, verification, issuance of carbon credit certificates, validity, pricing, and other related matters.
The introduction of the Carbon Credit Trading Scheme, 2023, reflects India’s commitment to combat climate change and transition to a low-carbon economy. By incentivizing emissions reductions and promoting sustainable practices, India aims to contribute significantly to global efforts in addressing the challenges posed by greenhouse gas emissions.
The Indian carbon market is expected to foster innovation, encourage investment in clean technologies, and drive sustainable development across various sectors. It is a significant step toward achieving India’s climate goals and ensuring a greener and more sustainable future for the country and the planet.