Brace Up For Carbon Credit Trading in India

Carbon credits are like passes that allow their owners to emit a certain amount of CO2 and other GHG within a prescribed limit. This limit is lowered periodically. There is a well-established global carbon credits market. The global market for compliance carbon credit is estimated to be worth € 238 billion, with an annual trading volume estimated to be 10.7 billion Giga tons. Hence carbon credits are a way to reduce environmental emissions. They encourage companies/ countries to invest in green projects once their emission exceeds the prescribed limits. It’s like a pass to earn the right to emissions that are generated from targeted carbon reduction projects which should lead to a transition to a cleaner and greener future.

Companies may also sell unwanted credits to other companies. This has given rise to carbon credit trading and the carbon credit market. Hence ideally, a company should reduce its emissions and sell the credits to others for a price. On the other hand, they need to spend extra on buying carbon credits if emissions exceed this limit. Climate change has become an alarming issue and carbon credit appears to emerge as a key instrument in resolving this issue.

The Indian Parliament recently passed the Energy Conservation (Amendment) Bill 2022 which will focus on establishing a domestic carbon credit trade in the country. The country has decided to completely stop the export of carbon credit until its own climate goals are met and encourage the growth of a local domestic carbon credit market. This will ensure more investments in the clean energy sector in our country. We already have Renewable Energy Certificates which are issued to clean energy producers. The Indian government agencies will issue these Carbon Trade Certificates.

Also, read European Carbon Trading Market goes into a Huge Slump on Greek concerns, post-2012 Kyoto uncertainty.

Other important aspects of the bill were a strong focus on green hydrogen and green ammonia, usage of non-fossil fuel energy for the energy needs of residential as well as commercial buildings, formation of the Bureau of Energy Efficiency (BEE), and reduction of oil imports in the country.