The Central Electricity Regulatory Commission will be the Indian carbon market regulator for all trading activities, while Grid-India will be its registry.
The Indian government has notified a draft of the long-awaited Carbon Credit Trading Scheme, 2023. To be sure, the notification does not provide regulations, procedures and guidelines for the functioning of the carbon market and instead put the onus on a ‘National Steering Committee’ that would be constituted with the Secretary, Ministry of Power being the ex-officio-chairperson.
The draft notification has now been made public to seek comments from stakeholders.
The move comes against the backdrop of India’s ambitious target of being net zero by 2070. In this context, a carbon market will help decarbonise the commercial and industrial (C&I) sector. A carbon market in India, which as per the notification, as of now will be a regulated domestic one, will provide flexibility to entities in hard-to-abate sectors to supplement their own greenhouse emission reduction efforts with credits from the carbon market.
The steering committee will govern and oversee the functions of the carbon market. It will recommend the Bureau of Energy Efficiency (BEE) for the formulation and finalisation of procedures for institutionalising the Indian carbon market and setting specific greenhouse gas emission targets for the obligated entities among other functions.
This panel will have secretary of the Ministry of Environment, Forest and Climate Change as its co-chairperson and members from the ministries of finance, new and renewable energy, steel, coal and petroleum, Niti Aayog among others.
The Central Electricity Regulatory Commission (CERC) will be the Indian carbon market regulator for all trading activities, while Grid-India will be its registry. The BEE will be the administrator of the carbon market, and it will also determine the procedure, including eligibility criteria for the accreditation of any agency, to function as an accredited carbon verification agency.
Besides the steering committee, one or more technical committees will also be constituted, the notification stated.
A compliance mechanism will also be formulated, for which the power ministry would identify the sectors. Following the identification of the sectors, the BEE will develop the trajectory and targets for the entities under the compliance mechanism.
Under the compliance mechanism, “the Ministry of Power, after duly considering the recommendations of Bureau and National Steering Committee for Indian carbon market, shall recommend the notification of greenhouse gases emission intensity targets to the Ministry of Environment, Forest and Climate Change for notification under the Environment Protection Act, 1986.”
The carbon trading market is expected to incentivise entities with low reduction costs to reduce emissions beyond their mandate. Besides, trading in the carbon market could reduce the overall cost of emission reductions in India.
Carbon credit means a value assigned to a reduction or removal or avoidance of greenhouse gas emissions achieved, and is equivalent to one ton of carbon dioxide equivalent. The “Indian carbon market framework” means a national framework established with an objective to reduce or remove or avoid greenhouse gas emissions from the Indian economy by pricing the greenhouse gases emission through trading of carbon credit certificates.
The Carbon Credit Trading Scheme, 2023 first announced under the Energy Conservation Act, aims to set up a carbon credit trading market in the country.