Carbon Credit Trading Scheme

Source: PIB
GS III: Conservation, environmental pollution and degradation, environmental impact assessment

What you should know?

Why in the News?

The government notified the Carbon Credit Trading Scheme, in December 2023 to implement the carbon trading mechanism.

The Government of India officially notified India’s Carbon Credit Trading Scheme (CCTS 2023) on June 28, 2023.
It is under the Energy Conservation Act, of 2001.
Its primary goal is to establish the country’s first-ever domestic carbon market.

What is Carbon Credit?

Every company or country has a certain amount of greenhouse gas (GHG) limit set.
If a country or an organisation utilised below the amount, the rest of the amount can be credited.
In short, companies or countries that reduce their emissions below their allocated limit can sell their surplus carbon credits to other entities that need them.

What is the aim of the Carbon Credit Trading Scheme?

It aims to efficiently price emissions through CCC trading and expand the voluntary carbon market.
Each credit represents one tonne of carbon dioxide equivalent (tCO2e).
There is no set timeline for the launch of the voluntary carbon market.
It will help to meet its near-term Nationally Determined Contributions (NDC) goals.

One Tonne of CO2: Consider a gas-based car that drives almost 4000 KM, emits about 4.6 tons of CO2 per year.

Who are the Stakeholders?

Bureau of Energy Efficiency (BEE): Responsible for developing GHG emissions trajectories and targets for obligated entities.
Grid Controller of India Limited: The organisation that keeps the ICM registry and it registers the obligated entities.
Central Electricity Regulatory Commission (CERC): They are the regulator of the trading of carbon credit certificates.

Sector-wise approach

CCTS focuses on regulating specific industries responsible for substantial GHG emissions.
These sectors will be mandated to record and maintain their GHG emissions intensity data.

Target Settings

Based on the recommendations of BEE, the National Steering Committee on Indian Carbon Market (NSCICM), will recommend GHG emission intensity targets for obligated entities.
These targets will be notified by the Ministry of Environment, Forest and Climate Change (MoEF&CC).

Issuing Carbon Credit Certificates

Entities that achieve their emission reduction targets will be issued carbon credit certificates.
Those falling short will need to purchase these certificates from the Indian Carbon Market (ICM).

Compliance Requirements

Obligated entities will be required to achieve the GHG emission intensity targets notified by the MoEF&CC.
The obligated entities will also be required to meet any other targets.
These targets include
- The use of non-fossil-based energy.
- Reduction of specific energy consumption.
These targets will be notified by the Ministry of Power (MoP) under the Energy Conservation Act, 2001, as amended periodically.

In Voluntary Carbon Credit Trading no externally imposed limit on carbon credit.
The idea is to balance out emissions by supporting initiatives that contribute to a net reduction in carbon dioxide (CO₂) levels.
These credits come from external projects that avoid or reduce emissions.
These credits result from projects that actively lower existing emissions.

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