In a significant move towards combating climate change, promoting sustainability, and reducing greenhouse gas emissions, the Indian government has introduced the Carbon Credit Trading Scheme 2023. This pioneering initiative assigns a value, referred to as a carbon credit, to each metric ton of carbon dioxide equivalent (tCO2e) reduced or avoided, establishing a structured framework for the country’s carbon market. By implementing this scheme, India aims to encourage industries to play a vital role in achieving the nation’s emission reduction goals.

Industries Taking the Lead

Under the newly introduced scheme, industries are set to become key contributors to India’s emission reduction targets. The Ministry of Power will identify designated consumers, including numerous energy-intensive industries, and assign them carbon emission targets to meet. Previously, these targets were primarily focused on energy efficiency goals. By incorporating carbon emissions into the framework, the government is effectively broadening the scope of environmental responsibility for industries and encouraging them to actively participate in sustainable practices.

Ensuring Efficient Market Operations:

To ensure the smooth functioning of the carbon market, a National Steering Committee will be established. This committee will play a pivotal role in recommending necessary procedures, rules, and emission targets. By providing guidance and oversight, the committee will help maintain the integrity and effectiveness of the trading scheme. Additionally, the Bureau of Energy Efficiency, acting as the Administrator, will identify sectors that require emission reduction measures and issue carbon credit certificates based on recommendations from accredited verification agencies.

Transparent Trading through Secure Registry:

Transparency and accountability are crucial for the success of any trading scheme. To facilitate fair and transparent trading, a secure registry will be established, operated by the Grid Controller of India Ltd. This registry will serve as a centralized platform for recording and verifying carbon credit transactions. The Central Electricity Regulatory Commission will be responsible for regulating trading activities, ensuring market integrity, and safeguarding the interests of all stakeholders. By establishing these measures, the government aims to build trust and confidence in the carbon credit trading system.

Meeting Targets and Incentives:

The Bureau of Energy Efficiency will be responsible for recommending greenhouse gas emission targets for obligated entities, while the Ministry of Power will formally notify these targets. Entities that surpass their targets will receive carbon credit certificates as a reward for their outstanding performance. On the other hand, entities failing to meet their targets will be required to purchase carbon credit certificates to cover their deficit or pay a defined penalty. This incentivizes obligated entities to actively pursue emission reduction measures and encourages market participants to engage in sustainable practices.

Key Points from Carbon Credit Trading Scheme 2023:

1. National Steering Committee Recommendations:

• Formulate and finalize procedures, rules, and regulations for the Indian carbon market.
• Formulate specific greenhouse gas emission targets for obligated entities.
• Establish guidelines for trading carbon credit certificates outside India.
• Issue carbon credit certificates.
• Develop processes and conditions for the crediting period, renewal, or expiry of carbon credit certificates.
• Monitor the functioning of the Indian carbon market.
• Constitute necessary committees or working groups related to the Indian carbon market.

2. The Chairperson of the National Steering Committee will convene a meeting once every quarter of the year.

3. Functions of the Bureau as Administrator:

• Identify sectors and potential for reducing greenhouse gas emissions.
• Develop trajectory and targets for entities under the compliance mechanism.
• Issue carbon credit certificates based on recommendations.
• Establish market stability mechanisms for carbon credits.
• Define procedures and functions for accredited carbon verification agencies.
• Accredit agencies following the approved procedure for accredited carbon verification agencies.
• Develop data submission formats and forms for effective operation of the Indian carbon market.
• Conduct capacity building activities for stakeholders.

4. Role of the Central Electricity Regulatory Committee:

• Regulate matters related to the trading of carbon credit certificates.
• Safeguard the interests of both sellers and buyers.
• Regulate the frequency of carbon credit certificate trading.
• Provide market oversight and take necessary preventive and corrective actions to prevent fraud or mistrust.

5. The Central Government will determine the procedure and eligibility for agencies to be accredited as Carbon Verification Agencies.

6. The Ministry of Power will decide the compliance mechanism.

7. Operationalization of the Indian Carbon Market:

• The National Steering Committee will develop a detailed procedure that includes criteria for issuing, validating, setting a floor and forbearance for carbon credit certificates.
• The procedure will also cover requirements, formats, and timelines for submissions, monitoring, reporting, and verification.

References:

The Gazette of India – CCTS June 2023

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