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- The Energy Conservation (Amendment) Bill, 2022 was passed in Parliament on December 12, despite the Opposition’s demands to send it for scrutiny to a parliamentary committee.
- The Bill empowers the government to establish carbon markets in India and specify a carbon credit trading scheme.
What are carbon markets?
- Article six of the 2015 Paris Agreement provides for the use of international carbon markets by countries to fulfil their nationally determined contributions (NDC) to keep global warming within 2°C.
- Carbon markets are essentially a tool for putting a price on carbon emissions — they establish trading systems where carbon credits or allowances can be bought and sold.
- A carbon credit is a kind of tradable permit that, as per UN standards, equals one tonne of carbon dioxide removed, reduced, or sequestered from the atmosphere.
- A United Nations Development Program (UNDP) release this year noted that interest in carbon markets is growing globally — 83% of NDCs submitted by countries mention their intent to make use of international market mechanisms to reduce greenhouse gas emissions.
- There are broadly two types of carbon markets that exist today — compliance markets and voluntary markets.
- Voluntary markets are those in which emitters — corporations, private individuals, and others— buy carbon credits to offset the emission of one tonne of CO2 or an equivalent greenhouse gas. Such carbon credits are created by activities which reduce CO2 from the air, such as afforestation.
- In a voluntary market, a corporation looking to compensate for its unavoidable emissions, purchases carbon credits from an entity engaged in projects that reduce, remove, capture, or avoid emissions.
- For instance, in the aviation sector, airlines may purchase carbon credits to offset the carbon footprint of the flights they operate.
- Compliance markets on the other hand which are set up by policies at the national, regional, and/or international level are officially regulated.
What are the challenges?
- The UNDP points out serious concerns pertaining to carbon markets — ranging from double counting of greenhouse gas reductions, quality and authenticity of climate projects that generate credits to poor market transparency.
- There are also concerns about ‘greenwashing’ — companies may buy credits, simply offsetting carbon footprints instead of reducing their overall emissions.
What are concerns about new Bill?
- The Bill empowers the Centre to specify a carbon credits trading scheme. Under the Bill, the central government or an authorised agency will be able to issue carbon credit certificates.
- These carbon credit certificates will be tradeable in nature. Other persons would be able to buy carbon credit certificates on a voluntary basis.
- Opposition members pointed out that the Bill does not provide clarity on the mechanism to be used for the trading of carbon credit certificates and about who will regulate such trading.
- Members also raised questions about the right Ministry to bring in a scheme of this nature, pointing out that while carbon market schemes in other countries are framed by their environment ministries, the Indian Bill was tabled by the Power Ministry.
- Another important concern raised is that the Bill does not specify whether certificates under already existing schemes would also be interchangeable and tradeable with carbon credit certificates.
- Two types of tradeable certificates are already issued in India— Renewable Energy Certificates (RECs) and Energy Savings Certificates (ESCs).
SOURCE: THE HINDU, THE ECONOMIC TIMES, PIB
