Centre may notify emission trading scheme by June

Subject : Environment

Section: Climate Change

Concept :

After the passing of the Energy Conservation (Amendment) Bill last December, the Centre is now in the final stages of notifying an Emissions Trading Scheme (ETS) that would require polluting industries to achieve certain standards of energy efficiency and permit them to ‘trade’ these improvements.

What is Emissions Trading?

Emissions Trading is one of the so-called Kyoto Mechanisms under the United Nations Framework Convention on Climate Change (UNFCCC).
Emissions trading is a market-based method of pollution control by offering financial incentives for lowering pollutant emissions.
As a crucial instrument for mitigating climate change, carbon emission trading for CO2 and other greenhouse gases has been implemented in China, the European Union, and other nations.
In an emissions trading scheme, a central authority or governmental organization allots or sells a finite number of permits that authorize the release of a particular quantity of a particular pollutant over a finite time period.
Polluters must possess licenses for a quantity equivalent to their emissions.
If polluters wish to expand their emissions, they must purchase licenses from people who are prepared to do so.

Cap on emission and Tradable allowance

The two main elements of emissions trading systems are a limit (or cap) on pollution and tradable allowances that are equivalent to the limit and allow holders of the allowances to emit a certain amount of the pollutant.
This cap makes sure the environmental objective is achieved, and the tradable allowances provide each emissions source the freedom to choose their own course for compliance.
These initiatives are frequently referred to as “market-based” because permits can be purchased and sold on an allowance market.