CARBON
CREDIT AND TRADING SYSTEM - ENVIRONMENT
News:
Carbon
credit trading scheme comes into being to reduce GHG emissions
What's
in the news?
● Recently,
The Carbon Credit and Trading Scheme (CCTS) was notified to effectively create
a whole system of mechanisms that would govern the Indian carbon and GHG
emissions scenario in the coming few years.
What
is the carbon market?
● Carbon
markets are trading systems in which carbon credits are sold and bought.
Companies or individuals can use carbon markets to compensate for their
greenhouse gas emissions by purchasing carbon credits from entities that remove
or reduce greenhouse gas emissions.
● Article
6 of the Paris Agreement provides for the use of international carbon markets
by countries to fulfill their NDCs (Nationally Determined Contributions).
Important
provisions of the scheme:
1. Scheme:
This scheme assigns a value, known
as a carbon credit, to every ton of carbon dioxide equivalent (tCO2e) reduced
or avoided, providing a structured framework for the country's carbon market.
2. Nodal
ministry: The Ministry of power
will establish designated consumers, including energy intensive industries, and
assign them carbon emission targets to achieve.
3. National
Steering Committee: To ensure seamless market functioning, a National
Steering Committee will recommend
procedures, rules and emission targets.
4. Implementation:
The Bureau of Energy Efficiency, as
the administrator, will identify sectors for emission reduction and issue
carbon credit certificates based on recommendation from accredited verification
agencies.
5. Target
setup: The bureau will recommend
greenhouse gas emission targets for obligated entities, while the Ministry of Power will notify the targets.
● Targets
in terms of tonnes of carbon dioxide equivalent (tCO2e) per unit will be set
after considering available technologies and likely cost of their
implementation, among other relevant aspects.
6. Process:
Obligated entities exceeding their targets will get carbon credits, whereas
entities failing to meet the targets have to purchase carbon certificates to
cover their deficit or pay a defined penalty.
7. Central
Electricity Regulatory Commission (CERC):
The CERC will serve as the regulatory body for all trading activities within
the Indian carbon market. It will ensure compliance, monitor trading
activities, and enforce regulations to maintain market integrity.
Advantages:
1.
Revenue generation: Through this scheme,
revenues can be generated as an additional source of government revenue, which
may then be used to invest in further climate action, lower other taxes or
compensate for other sectors which are affected by this scheme.
2. Encourage
investments: It can be a vehicle for mobilizing a significant portion of
investments required by Indian economy to transition toward low-carbon
pathways,
3. Adoption
of new technologies: The CCTS will promote the deployment and innovation of
low carbon technology.
4. Reduction
of GHG emission: A well-designed, competitive carbon market mechanism would
enable the reduction of GHG emissions at the least cost, both at the level of
the entity, as well as the overall sector.
● Eg. Similar Emission
Trading Schemes in Europe have reduced 30% GHG emissions over 10 years.
5. Private
sector participation: Through this scheme private sector participation in
the emission reduction and achieving the climate targets can be ensured.
6. Co-benefits:
The new scheme will also create tremendous economic opportunities and promote
sustainable development in the country.
What
measures does the government take to ensure the success of the scheme?
1.
Ensure optimal pricing: Optimal pricing of
credits in the market, a critical factor for supporting long term investments
in energy efficient processes and technologies.
2. Internationalization:
Aligning the Indian system with international standards is crucial for
international recognition and compliance with Carbon Border Adjustment Mechanism.
3. Cover
voluntary carbon trading: The scheme does not cover voluntary carbon credit
trading; Provisions should be taken to include voluntary carbon credit and that
will increase the success of the scheme.
4. More
cooperation with industrialized states:
Developed States such as Andhra Pradesh, Telangana, Karnataka, Kerala,
Rajasthan, Gujarat, Assam, Haryana, Maharashtra, Punjab and Tamil Nadu should
play a key role in ensuring the success of the scheme.
5. Greenwashing:
Companies may buy credits, simply offsetting carbon footprints instead of
reducing their overall emissions or investing in clean technologies; So, the
government should establish an empowered body to monitor such activities.
6. Ensure
transparency in the operation: Regulatory body should address serious
concerns pertaining to carbon markets- ranging from double counting of
greenhouse gas reductions and quality and authenticity of climate projects to
ensure the market transparency.