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Carbon market- bill amendment - INDIA


The government is aiming to strengthen the Energy Conservation Act of 2001, a 20-year law that has helped fuel India's transition to a more energy-efficient future. This will assist in the achievement of more ambitious climate change targets, ensuring a faster transition to a low-carbon economy.


There are two main goals of the Energy Conservation Act of 2001 Amendment Bill, which was presented to Parliament on Wednesday. Firstly, it aims to make the use of green energy compulsory for a select group of industrial, commercial, and even residential consumers. A prescribed minimum proportion of the energy they use must come from renewable or non-fossil fuel sources. Secondly, it aims to establish a domestic carbon market to facilitate trade in carbon credits.


Carbon credits are measurable, verifiable emission reductions from certified climate action projects. These projects reduce, remove or avoid greenhouse gas (GHG) emissions. But they also bring a whole host of other positive benefits, for example, they empower communities, protect ecosystems, restore forests or reduce reliance on fossil fuels. Once a company or an individual purchases a carbon credit, that credit is permanently retired and cannot be used again.

Carbon markets are regulatory structures that facilitate, in particular, oil and gas-intensive companies or heavy industry (or, in the case of COP25, countries) in reduction of their economic footprint by providing a platform for trading carbon credits.

This concept evolved back in 1997 under the ‘clean development mechanism’ (CDM) of the Kyoto Protocol. The industrialised nations no longer felt obligated to meet their targets under the Kyoto Protocol as the world explored a successor climate deal, the Paris agreement. There is a carbon market planned under it, whose specifics are still being worked out. In India, an incentive program for energy efficiency has been in place for more than ten years. When any unit performs better than the required efficiency criteria, it can obtain efficiency certificates under the Perform, Achieve, and Trade (PAT) Scheme, a BEE program.

The proposed modification to the Energy Conservation Act will create a new carbon market with far greater potential. Despite the fact that the specifics of this carbon market are not yet known, it is most likely to function similarly to the European ETS in terms of facilitating the purchase and sale of carbon credits.


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