Context- Two months ago, in consultation with the Bureau of Energy Efficiency (BEE), India’s Power Ministry amended the Carbon Credit Trading Scheme (CCTS).
What is Carbon Credit Trading Scheme?
- Energy conservation amendment act 2022 added new clauses authorising parliament to establishment a domestic carbon credit trading scheme.
- The Bureau of Energy Efficiency (BEE), an agency established by the Ministry of Power launched the Carbon Credit Trading Scheme to address the issue of greenhouse gas (GHG) emissions and mitigation of climate change in the country.
- The scheme is aimed at facilitating trading of carbon credits and incentivise and reward entities that reduce, remove or avoid greenhouse gas emissions.
- It assigns a value, known as a carbon credit, to each tonne of carbon dioxide equivalent (tCO2e) reduced or avoided. These credits could be bought, sold and traded within the country’s carbon market framework.
- Carbon credit certificates are earned by entities that are covered under the law by reducing emissions. These certificates are tradeable.
- This permit can also be purchased by entities that emit more than a pre-determined threshold or sold by entities emitting less than the threshold under the rules of the trading scheme.
- In other words, companies with low(er) emissions can sell their extra allowance to larger emitters.
Note: as of now it does not include CCUS (Carbon capture utilization and storage) formally but government has indicated its willingness to include it in future.
What is the recent amendment in CCTS?
- On account of this amendment, the CCTS now provides for an offset mechanism — in addition to its pre-existing compliance regime.
- Compliance mechanism involves mandatory implementation among ‘obligated’ entities (which have a legal obligation to reduce emissions).
- Voluntary markets are driven by businesses seeking to decrease their carbon footprint (without a legal mandate to do so), including by ‘offsetting’ greenhouse gas (GHG) emissions on account of corporate net-zero commitments.
- Under the amended CCTS, nonobligated entities can voluntarily register projects in sectors identified by a national steering committee for securing tradable carbon credit certificates (CCCs). These CCCs will be issued after evaluative exercises conducted by a BEE-accredited agency.