India will be the biggest carbon market by 2030

Subject : Environment

Section: Climate Change

Concept :

By 2030, India will be the biggest carbon market in the world, Abhay Bakre, Director General, Bureau of Energy Efficiency, has said.
Indian companies have been generating and selling carbon credits, their buyers have always been abroad.
India is working towards building a fully domestic carbon market, where both buyers and sellers are Indian entities.

Background

In December 2022, Parliament passed the Energy Conservation (Amendment) Bill, 2022. The Bill amended the Energy Conservation Act, 2001, to empower the government to establish carbon markets in India and specify a carbon credit trading scheme.
Government announced a list of 13 activities that will be considered for the trading of carbon creditsunder Article 6.2 mechanism to facilitate transfer of emerging technologies and mobilise international finance in India.

Energy Conservation (Amendment) Bill, 2022

The Bill empowers the Centre to specify a carbon credits trading scheme.
Under the Bill, the central government or an authorised agency will issue carbon credit certificates to companies or even individuals registered and compliant with the scheme.
These carbon credit certificates will be tradeable in nature. Other persons would be able to buy carbon credit certificates on a voluntary basis.

About Carbon Markets

Carbon markets are a tool for putting a price on carbon emissions. It allows the trade of carbon credits with the overall objective of bringing down emissions.
These markets create incentives to reduce emissions or improve energy efficiency.
For example, an industrial unit which outperforms the emission standards stands to gain credits.
Another unit which is struggling to attain the prescribed standards can buy these credits and show compliance to these standards. The unit that did better on the standards earns money by selling credits, while the buying unit is able to fulfill its operating obligations.
It establishes trading systems where carbon credits or allowances can be bought and sold.
carbon credit :A carbon credit is a kind of tradable permit that, per United Nations standards, equals one tonne of carbon dioxide removed, reduced, or sequestered from the atmosphere.
The owners of the credits sell them to those obligated to reduce carbon dioxide emissions but are unable to do so by their own efforts.
Carbon allowances or caps : Carbon allowances or caps, meanwhile, are determined by countries or governments according to their emission reduction targets.

Article 6 of the Paris Agreement

Article 6 of the Paris Agreement provides for the use of international carbon markets by countries to fulfill their NDCs (Nationally Determined Contributions).
NDCs are climate commitments by countries setting targets to achieve net-zero emissions.
Article 6.2 provides an accounting framework for international cooperation, such as linking the emissions-trading schemes of two or more countries.
Article 6.4 establishes a central UN mechanism to trade credits from emissions reductions generated through specific projects. For example, country A could pay for country B to build a wind farm instead of a coal plant. Emissions are reduced, country B benefits from the clean energy and country A gets credit for the reductions.
Article 6.8 establishes a work program for non-market approaches, such as applying taxes to discourage emissions.

Bureau of Energy Efficiency

Bureau of Energy Efficiency is a statutory body set up under the Energy Conservation Act, 2001.
The Bureau of Energy Efficiency assists the government in developing policies and strategies with a thrust on self-regulation and market principles with the primary objective of reducing the energy intensity of the Indian economy within the overall framework of the Energy Conservation Act, 2001.
It functions under Ministry of Power.