New Delhi Prime Minister Narendra Modi may launch a national carbon trading platform on August 15 as India moves forward with its climate commitments, two people aware of the development said.
The government may also bring in guidelines where carbon trading would be mandatory for certain sectors.
Carbon markets are trading systems where credits are bought and sold, allowing an entity to emit a certain amount of greenhouse gases.
There are generally two types of carbon markets – compliant and voluntary. The Centre’s move would make it a compliance market for some sectors, the people cited above said on condition of anonymity.
The push for carbon markets comes as India aims to become carbon-neutral by 2070.
Several companies have announced energy transition and net-zero targets in line with the government’s plan. A formal carbon market would provide businesses in hard-to-reach areas the flexibility to supplement their efforts with credits from the carbon market.
Queries sent to the Prime Minister’s Office, and the Ministries of Power and New and Renewable Energy remained unanswered till press time.
This comes against the backdrop of planned amendments to the Energy Conservation Act to mandate the use of clean energy, including green hydrogen, and to establish a regulatory framework for carbon trading.
After the bill provides for a regulatory framework for carbon trading in India, the government will develop guidelines.
Santosh Singh, Partner and Managing Director, Climate and Agriculture Solutions at Intellecap, a consulting firm, said: “The PAT (Performance, Achieve and Trade) scheme of the Bureau of Energy Efficiency (BEE) and Renewable Energy Certificate (REC) mechanisms. Provide a sound experience and foundation for building the Carbon Markets trading platform.”
Singh said sectors such as cement, steel, thermal power plants and fertilisers may be made mandatory for carbon trading on the platform.
PAT is a market-based mechanism to reduce specific energy consumption in energy-intensive industries.
BEE provides energy-intensive industries (known as designated consumers) specific energy consumption targets based on their operating parameters.
Carbon markets have proven to be one of the most effective drivers of reducing emissions, offering the lowest-cost emissions reductions. Incentives in the form of carbon credits against the deployment of clean technologies will increase private sector participation in climate action.
A recent report by Intellecap said carbon credits would encourage low-cutting cost entities to reduce emissions beyond their mandate.
Trading in the carbon market can reduce the total cost of emissions reduction at the societal level in India.
One carbon market can enable India to effectively participate in an interconnected global carbon market.
It can spur innovation from Indian MSMEs and finance clean projects, which have huge potential for emission reduction. They can provide more liquidity to make up for the shortfall in certificates from India, while encouraging more reductions globally.
The Renewable Energy Certificate (REC) mechanism is a market-based instrument to promote renewable energy and facilitate compliance with renewable purchase obligations.
The trading of REC at Energy Exchange of India and Power Exchange India Limited is carried out within the tolerance and minimum value prescribed by the Central Electricity Regulatory Commission.
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