Carbon Credit Trading Scheme

The Energy Conservation Act of 2001 empowers the Central Government to specify rules regarding the Carbon Credit Trading Scheme. Exercising power given in section 14(w) of the Energy Conservation Act and consultation with the Bureau of Energy Efficiency incorporated under this act, the Central Government has notified a scheme called Carbon Credit Trading Scheme to enforce the efficient use of energy and its conservation. The Carbon Credit Trading Scheme sets up an Indian Carbon Market and constitutes various governing bodies for its administration and management.

What Was The Need For The Indian Carbon Market?

To minimise the carbon emission and charge those who emit Greenhouse Gases, it was necessary to implement the Indian Carbon Market in India. It will create demand for emission credits and attract the finance and technology for sustainable projects. To achieve India's 2030 target on climate change, the Indian Carbon Market will play a crucial role.

Indian Carbon Market is being established under the Carbon Credit Trading Scheme notified by the Central Government of India. This market will have a far-reaching impact on climate change, GHG emission management and carbon footprint control. Some of the significant benefits are as follows-

• It will decarbonise the economy of the country.
• It will price and charge for Greenhouse Gas Emissions.
• There will be Carbon Credit Certificates that will be issued to the operators of sustainable projects.
• The emitters of GHG gases will need to purchase these certificates.
• The Indian Carbon Market will enhance energy transition efforts and encourage the usage of renewable energy.
• It will encourage the establishment of sustainable projects.

Who are Obligated Entities?

The Ministry of Power will decide the industrial sectors in which this Carbon Credit Trading will be applicable. Within these sectors, the Ministry of Power will also identify and notify the obligated entities that must fulfil the Carbon Credit Target as prescribed. So the Obligated Entities are the entities to which the rules on Carbon Credit Trading apply.

The National Steering Committee is responsible for developing a detailed procedure for Carbon Credit Trading and the overall operations of the Indian Carbon Market. As soon as it comes up with a straightforward process, we will update the same here, but as per the Carbon Credit Trading Scheme, this procedure will contain the following elements-

• There will be a criterion for the issuance of Carbon Credit Certificates.
• The committee will define the validity of Carbon Credit Certificates.
• The price of the Carbon Credit Certificates shall also be determined.
• The process of submissions will be clarified, along with the format and requirements.
• Rules regarding the monitoring, reporting and verification shall also be prescribed.
• There will be Power exchanges for the trading of Carbon Credit Certificates.
• Power Exchanges can only operate after the approval of the Central Electricity Regulatory Commission.
• The Bureau of Energy Efficiency shall constitute multiple technical committees to deal with different areas of Carbon Credit Trading Compliance.
• The Bureau and the National Steering Committee shall make rules for the accreditation of the Carbon Verification Agency which will function as prescribed by the Bureau.

The following bodies are constituted under the Carbon Credit Trading Scheme to govern the issues relating to the Indian Carbon Market-

National Steering Committee

It is constituted by the government of India to govern and oversee the functioning of the Indian Carbon Market. It shall have members, including the secretaries and joint secretaries of various ministries concerning energy, finance, policy and environment. The meeting of the Steering Committee is held at least once a quarter of every year. The functions of the National Steering Committee include-

• Recommend procedures for establishing the Indian Carbon Market.
• Formulate and finalise rules and regulations for the Indian Carbon Market.
• Develop Greenhouse Gas Emission targets for obligated entities.
• Create guidelines for trading Carbon Credit Certificates outside of India.
• Issue Carbon Credit Certificates.
• Establish processes for crediting period, renewal, or expiry of Carbon Credit Certificates.
• Monitor the operations of the Indian Carbon Market.
• Recommend the formation of Committees or Working groups as needed for the Indian Carbon Market.

Bureau of Energy Efficiency

The Bureau of Energy Efficiency, constituted under the Energy Conservation Act, shall play the administrator role under the Carbon Credit Trading Scheme. It will have the following functions to discharge-

• Identify sectors with the potential for reducing greenhouse gas emissions and recommend their inclusion in the Indian carbon market to the Ministry of Power.
• Develop trajectories and targets for entities under the compliance mechanism.
• Issue Carbon Credit Certificates.
• Establish the procedure for accreditation and define the functions of accredited Carbon Verification Agencies.
• Determine fees payable by registered entities, with the approval of the Central Government, to cover the implementation costs of this Scheme.
• Develop the process or conditions for the crediting period, renewal, or expiry of Carbon Credit Certificates.
• Develop and maintain the necessary information technology infrastructure, including a user guidance platform, for the Indian Carbon Market.
• Establish any Committees or working groups recommended by the National Steering Committee for the Indian Carbon Market.

The Grid Controller of India

The Grid Controller of India will play the role of Registry for the Indian Carbon Market. It will be responsible for the following functions-

• Follow Bureau's directions as needed.
• Register obligated or non-obligated entities.
• Maintain a secure database with solid security measures.
• Keep records of all transactions.
• Share transaction records with Power Exchange and Bureau.
• Aid in developing an IT platform for the Carbon Credit Certificate database
• Serve as India's meta-registry.
• Establish connections with approved National or International registries.
• Perform any other assigned functions by the Bureau.

Central Electricity Regulatory Commission

The Central Electricity Regulatory Commission of India will regulate trading activities. It will furnish the following responsibilities-

• Regulate trading of Carbon Credit Certificates.
• Protect the interests of sellers and buyers.
• Control the frequency of Carbon Credit Certificates trading.
• Ensure market oversight and take action against fraud or mistrust.

The Ministry of Power will decide the following points for the development of Compliance under the Carbon Credit Trading Scheme-

• It will decide the sectors and obligated entities to be covered under compliance.
• The Bureau will undertake studies to decide on the targets under these compliances.
• Accordingly, the Ministry of Environment, Forest and Climate Change shall set the Greenhouse Gas Emission Intensity Targets.
• The obligated entities must achieve these targets as defined earlier, along with other prescribed marks.
• These obligated entities shall be provided with the Carbon Credit Certificate if they successfully reduce the greenhouse gas emission intensity, exceeding the prescribed target.
• If these obligated entities cannot minimise the emissions below target, they must purchase Carbon Credit Certificates to fulfil the obligations.

Our team at Corpseed is continuously working to assist businesses in their compliance management and acquiring registrations and licences as required. We provide the best consultation to our clients through desk-based research, documentation and coordination. Our team has extensive knowledge and experience of the laws applicable in India. We can provide you with the requisite guidance regarding Carbon Credit Trading Scheme and assist you with the processes involved in the Indian Carbon Market. We serve as a one-stop solution for all your business needs.