Govt seeks comments on draft carbon credit trading scheme

The union ministry of power has come up with the much anticipated draft Carbon Credit Trading Scheme and sought comments from stakeholders including states by 14 April 2023. 

The ministry, in the draft proposed to set up an Indian Carbon Market Governing Board with the secretary for the ministry of environment, forest and climate change as its chairperson for direct oversight of its administrative and regulatory functioning of the market.

“The governance of the Indian Carbon Market(ICM) and direct oversight of its administrative and regulatory functioning shall vest in the Governing Board, to be called as ICMGB.” the draft said.

The board will would be mandated to meet at least once in a quarter would recommend procedures for institutionalizing the Indian carbon market, recommend to the central government the rules and regulations for the functions of the market, recommend methodologies to be used under voluntary mechanism, guidelines regarding sale of carbon credit certificates outside India.

It would also recommend the Centre or the designated agency for issuance of carbon credit certificate (CCC), among other functions. The Bureau of Energy Efficiency (BEE) would be the administrator for the carbon market and also operate as the as the secretariat for ICMGB.

As the administrator, the BEE would develop standards and processes for registering projects under voluntary mechanism, issue carbon credits certificate as recommended by the ICMGB and develop market stability mechanism for carbon credits. The bureau would also develop and maintain the IT infrastructure including the knowledge platform required for the carbon market along with maintaining secure database with all security protocols.

The regulator of trading activities in the carbon market would be Central Electricity Regulatory Commission (CERC), wherein it would regulate matters relating to trading of carbon credit certificates and including frequency of the trading take corrective actions to prevent frauds and also safeguard interests of both sellers and buyers, the proposal said.

CERC would also constitute technical committees for different areas as required under either compliance or voluntary mechanisms. Power exchanges would have to seek approval of the commission for foraying into carbon credit trading market space.

The draft noted that under the compliance mechanism, the obligated entities including designated consumers covered under compliance mechanism, as notified by the Centre from time to time, shall register themselves for Carbon Credit Trading Scheme.

For voluntary trading mechacnism, BEE shall develop methodologies and detailed procedure for registration of projects and issuance of carbon credit certificates for different sectors, as and when required, the draft said.

The draft comes after the parliament in December last year cleared the Energy Conservation (Amendment) Bill, 2022 aimed at putting in place provisions to make the use of clean energy mandatory. The bill paved the way for setting up a carbon market in India.

In an interview to Mint in January, BEE director general Abhay Bakre had said India’s carbon trading framework is getting ready for its rollout and the framework may be released this year and the market for voluntary carbon trading too will open during the year.

“We expect that within this year 2023, the framework will be rolled out and the voluntary market will be there. The compliance market will take time because targets and timelines need to be given to the industries. It would take about 2-3 years,” he said, adding that the current Perform, Achieve and Trade (PAT) scheme would be transitioned into the compliance market,“ he had said.

Power exchanges are also gearing up to offer platforms for carbon credits trading. In December, the Indian Energy Exchange announced the setting up of a wholly-owned subsidiary, International Carbon Exchange Pvt. Ltd, to explore business opportunities in the voluntary carbon market.

According to experts, a carbon market would help as many leading Indian corporates have made commitments to become carbon-neutral and the market will provide flexibility to entities in hard-to-abate sectors and with high reduction costs to supplement their own reduction efforts with credits from the carbon market. The market is expected incentivize entities with low reduction costs to reduce emissions beyond their mandate and trading in the carbon market could reduce the overall cost of emission reductions in India.