India has taken a significant stride toward establishing its first carbon market by releasing a draft framework for the Carbon Credit Trading Scheme, 2023. This framework outlines the regulatory structure and key stakeholders responsible for the formation and operation of the carbon market. The move aligns with India’s ambitious goal of achieving net-zero emissions by 2070 and aims to facilitate the decarbonization of the commercial and industrial sectors.
The draft framework establishes a National Steering Committee that will oversee the operations of the carbon market. Headed by the Secretary of the Ministry of Power, the committee will include representatives from various ministries, such as Environment, Finance, New and Renewable Energy, Steel, Coal, Petroleum, and Niti Aayog. This committee will play a crucial role in formulating procedures, setting emission targets for obligated entities, and providing guidance to the Bureau of Energy Efficiency (BEE) in institutionalizing the Indian carbon market.
Several key entities and bodies are mentioned in the draft framework:
Central Electricity Regulatory Commission (CERC): The CERC will serve as the regulatory body responsible for overseeing all trading activities within the Indian carbon market. Its primary functions will include ensuring compliance, monitoring trading activities, and enforcing regulations to maintain market integrity.
Grid-India: Grid-India will act as the registry for the carbon market, maintaining records of carbon credits, transactions, and participant information. Its role is crucial in ensuring transparency and accountability within the market.
Bureau of Energy Efficiency (BEE): The BEE will assume the role of the carbon market administrator. It will develop procedures and eligibility criteria for accrediting carbon verification agencies. Working closely with the National Steering Committee, the BEE will establish emission targets and trajectories for entities operating within the compliance mechanism.
Additionally, the draft framework mentions the formation of technical committees, alongside the National Steering Committee, to provide specialized expertise and support in specific areas related to the functioning of the carbon market.
Under the compliance mechanism, the Ministry of Power will identify the sectors subject to compliance requirements. The BEE will then establish emission reduction trajectories and targets for these entities. Following recommendations from the Bureau and the National Steering Committee, the Ministry of Power will recommend the notification of greenhouse gas emission intensity targets to the Ministry of Environment, Forest, and Climate Change for formal notification under the Environment Protection Act, 1986.
The establishment of a carbon market in India is expected to incentivize entities with low emission reduction costs to surpass their mandated targets. By participating in carbon trading, entities can complement their own emission reduction efforts by obtaining credits from the carbon market. This flexibility has the potential to reduce the overall costs of emission reduction initiatives throughout the country.
As the draft framework undergoes further scrutiny and potential revisions, the government’s efforts to establish India’s first carbon market indicate a commitment to combating climate change and achieving sustainability goals. Stakeholders will closely monitor developments, anticipating the finalization and implementation of the framework, which holds the potential to significantly impact India’s carbon emissions and contribute to global climate action.
Disclaimer: The information in this article is based on the released draft framework and should not be considered as final decisions or outcomes. Further revisions and consultations may occur before the framework is officially adopted and implemented.