India close to finalizing industry carbon targets ahead of Baku climate meet

India close to finalizing industry carbon targets ahead of Baku climate meet

Sub: Env

Sec: Int Conventions

Context:

In the lead-up to the 29th edition of the Conference of Parties (CoP) in Baku, Azerbaijan, next month, India is in the final stages of setting carbon dioxide emissions intensity targets for select industries.

Key Points:

• India is working on numerical targets for carbon dioxide emissions intensity in specific industries. These targets are essential for creating a compliance carbon market.
• Companies must keep their emissions within set limits or buy credits from organizations with surplus credits.
• One credit is equivalent to saving one tonne of carbon dioxide beyond the set target.
• The price of a credit depends on market demand, supply, and regulatory pressure.
• Emissions intensity refers to caps on carbon emissions per unit of production.
• The Bureau of Energy Efficiency (BEE) notified in December 2023 that India must launch its compliance carbon market by the 2025-26 financial year.
• Oversight and Governance:
• The National Steering Committee for Indian Carbon Market (NSC-ICM) has direct oversight of the carbon market. It is co-chaired by the Secretary of the Ministry of Environment, Forest and Climate Change, and the Secretary of the Ministry of Power.
• Emission Caps for Hard-to-Abate Sectors:
• India’s emissions targets are likely to build on the existing Perform, Achieve and Trade (PAT) Scheme, which sets energy efficiency targets for industries.
• Targeted sectors include aluminium, chlor alkali, cement, fertilisers, iron and steel, pulp and paper, petrochemicals, petroleum refining, and textiles. These sectors are considered “hard to abate” because reducing emissions in these industries is expensive.
• Article 6 of the Paris Climate Agreement (2015) outlines how carbon markets, enabling carbon trading between countries, can be operationalised.

About Perform, Achieve & Trade (PAT) Scheme:

PAT Scheme is a flagship program under the National Mission for Enhanced Energy Efficiency (NMEEE).

Implementing Agency: It is implemented by the Bureau of Energy Efficiency (BEE) under the aegis of the Ministry of Power.

Objective: The PAT scheme aims at reducing Specific Energy Consumption (SEC), i.e., energy use per unit of production for Designated Consumers (DCs) in energy-intensive sectors, with an associated market mechanism to enhance the cost-effectiveness through certification of excess energy saving, which can be traded.

Energy Saving Certificates (ESCerts): 

The excess energy savings are converted into tradable instruments called Energy Saving Certificates (ESCerts) that are traded at the Power Exchanges.

Trading Platform: The two Power Exchanges, India Energy Exchange (IEX) and Power Exchange India Limited (PXIL) provide the trading platform for ESCerts.

Central Electricity Regulatory Commission (CERC) is the market regulator for the trading of ESCerts.

PAT Scheme is implemented in cycles of 3 years each, where the Designated Consumers (DCs) are assigned SEC reduction targets.

Designated Consumers (DCs) who fall short of their targets bid for the purchase of ESCerts.

Bureau of Energy Efficiency (BEE):

• BEE is a statutory body under the Ministry of Power.
• The Government of India set up BEE on 1st March 2002 under the provisions of the Energy Conservation Act, 2001.
• Mission: Develop policy and strategies with a thrust on self-regulation and market principles within the overall framework of the Energy Conservation Act (EC Act), 2001.
• Primary Objective: To reduce energy intensity in the Indian economy.