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Carbon Market in India - SRIRAMs IAS



  Aug 07, 2023

Carbon Market in India


Indian Carbon Market (ICM)

 
The Indian government has released a draft framework for a carbon market in India. The market will be called the Indian Carbon Market (ICM) and will be based on the Energy Conservation Act. The ICM will be a hybrid market, with both compliance and voluntary components.
 
The governing body of the ICM will be the ICM Governing Board (ICMGB), which will be co-chaired by the secretaries of the Ministry of Environment, Forests and Climate Change (MoEFCC) and the Ministry of Power (MoP). The ICMGB will play a key role in giving direction to the ICM, framing norms, and providing oversight.
 
The Bureau of Energy Efficiency (BEE) will be the ICM administrator and will be responsible for accrediting carbon verifiers (ACVs), who will measure, report and verify the emission reductions achieved by companies. BEE will also induct technical committees to provide sectoral guidance on abatement potentials and costs.
 
The registry function for the ICM will be handled by the Grid Controller of India, which will coordinate with market players and exchanges. The Central Electricity Regulatory Commission (CERC) will be the regulator of the ICM and will be responsible for balancing market power and protecting market integrity. CERC will also select and govern the carbon trading exchanges.
 
The ICM is still in its early stages of development, but it has the potential to play a significant role in reducing greenhouse gas emissions in India.
 

What is the Indian carbon trade market? What are the benefits of the Indian carbon market?

A. The Indian carbon market is a market where companies can trade carbon credits. Carbon credits are certificates that represent the reduction of one metric ton of carbon dioxide equivalent (CO2e). Companies can earn carbon credits by reducing their greenhouse gas emissions or by investing in projects that reduce emissions.
 

What are the benefits of the Indian carbon market?

The Indian carbon market has a number of potential benefits, including:
 
• It can help India to meet its climate targets.
 
• It can create a new market for low-carbon technologies and services.
 
• It can help to reduce greenhouse gas emissions.
 
• It can create jobs in the clean energy sector.
 

How does the Indian carbon market work?

The Indian carbon market is a cap-and-trade system. This means that the government sets a cap on the total amount of greenhouse gases that can be emitted by companies. Companies that emit less than their allotted amount can sell their surplus carbon credits to companies that emit more than their allotted amount.
 

Who are the participants in the Indian carbon market?

The participants in the Indian carbon market include:
 
• The government
 
• Companies
 
• Non-governmental organizations (NGOs)
 
• Investors
 

What are the challenges of the Indian carbon market?

The Indian carbon market faces a number of challenges, including:
 
• The lack of a clear regulatory framework.
 
• The lack of awareness about carbon credits.
 
• The high cost of compliance.
 
• The risk of fraud.
 

What are the different types of carbon credits?

There are two main types of carbon credits: compliance credits and voluntary credits. Compliance credits are issued under a cap-and-trade system and are used to meet emissions reduction targets. Voluntary credits are not issued under a cap-and-trade system and can be used for a variety of purposes, such as offsetting emissions or investing in clean energy projects.
 

How are carbon credits priced?

The price of carbon credits is determined by supply and demand. The more demand there is for carbon credits, the higher the price will be. The price of carbon credits can also be affected by factors such as the cost of compliance, the availability of renewable energy, and the global climate change policy landscape.
 

How are the changes made to the Energy Conservation (Amendment) Act, 2022 related to carbon trading?

 

Energy Conservation (Amendment) Act, 2022 say:

 
• The Central Government has the power to specify a carbon credit trading scheme. This means that the government can create a market for carbon credits, which are certificates that represent the reduction of one metric ton of carbon dioxide equivalent (CO2e). Companies that reduce their greenhouse gas emissions can earn carbon credits, which they can then sell to other companies that need to reduce their emissions.
 
• The Central Government can also specify a minimum share of consumption of non-fossil sources of energy by designated consumers. This means that the government can set a minimum amount of energy that designated consumers must use from non-fossil sources, such as wind and solar energy, biomass, green hydrogen etc.
 
• The government can also specify an energy conservation and sustainable building code for large buildings. This code will set standards for the energy efficiency of large buildings, such as office buildings and residential buildings. The government can also specify a lower connected load or contract demand for large buildings than the requirements specified in the code.
 
The Energy Conservation (Amendment) Act, 2022 is a significant piece of legislation that aims to reduce greenhouse gas emissions in India. The act gives the government the power to implement a number of measures to promote energy efficiency and the use of non-fossil sources of energy.
 


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