India hopes to establish carbon credit trading, verifiers by 2026

India hopes to establish carbon credit trading, verifiers by 2026

Subject : Environment

Section :Climate change

Context : The Carbon Border Adjustment Mechanism (CBAM) enters into application in its transitional phase from 1 Oct 2023.

Key Points:

• With EU’s CBAM entering the transition phase,  India prepares groundwork.

What is the transitional phase?

• A transitional period will apply for EU CBAM from 1 October 2023 to 31 December 2025, with solely quarterly reporting obligations; from 2026 onward, purchasing CBAM certificates will be required.
• Importers (customs declarants, indirect representatives) will be required to quarterly report embedded emissions in goods imported during that quarter of the calendar year, detailing direct and indirect emissions as well as any carbon price effectively paid in a third country.

What is CBAM?

• The EU CBAM is a climate measure that aims to address the risk of carbon leakage by ensuring equivalent carbon pricing for imports and domestic (EU) production that is subject to carbon costs under the European Union Emission Trading System (EU ETS).
• While the EU ETS applies to installations based in the EU and to certain production processes and activities (and will be extended further, as detailed below), CBAM will apply to certain goods imported into the EU.
• Payment of CBAM charges will be facilitated through the purchase and surrender of CBAM certificates, which will be priced at the weekly averages of EU ETS allowances auctions.

Indian status:

• India is unlikely to get a longer implementation period or special dispensation for its MSMEs, under the EU’s stringent Carbon Border Adjustment Mechanism (CBAM).
• Indian government, however, hopes to be ready with its system of accredited carbon verifiers and a fully functional carbon credit trading system (CCTS), to help Indian exporters of steel and aluminium meet the prescribed EU carbon norms by January 2026 — when the proposed carbon taxes will actually kick in
• Items covered under CBAM include cement, iron and steel, aluminium, fertilizers, electricity and hydrogen, in India, the hardest hit sectors could be iron and steel, and aluminium.
• CARBON VERIFIERS:
  • India is initiating discussions with the EU to get recognition for its carbon verifiers, which will be accredited by the Bureau of Energy Efficiency under the Ministry of Power.
  • A Carbon Verifier can audit carbon content in goods exported from India to the bloc.
  • Once the carbon verifiers and their processes are recognised by the EU, they will be able to give out certifications stating that a particular product being exported to the EU has gone through a certain level of carbon emissions.