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Draft Carbon Credit Trading Scheme

GS Paper 3

 Syllabus: Environment Conservation


Source: ET

Context: The power ministry issued a draft ‘Carbon Credit Trading Scheme’ to set up a framework for the Indian carbon market and sought feedback from stakeholders.

What is Carbon Credit?

A carbon credit is a tradable permit representing the right to emit a set amount of carbon dioxide or the equivalent amount of a different greenhouse gas.

  • It equals one tonne of carbon dioxide removed, reduced, or sequestered from the atmosphere.

What is Carbon Credit Trading Scheme (CCTS)?

The ‘CCTS’ means the scheme for the reduction or removal of greenhouse gas (GHG) emissions notified by the central government

Background of CCTS:

The parliament passed the Energy Conservation (Amendment) Bill, 2022. One of the provisions of this amendment included empowering the central government to “specify carbon trading scheme”, in consultation with the Bureau of Energy Efficiency (BEE).

Features of CCTS:

  • ‘Accredited carbon verifier’: It is an agency accredited by the BEE to carry out validation or verification activities in respect of the CCTS.
  • Setting up of the Indian Carbon Market Governing Board (ICMGB): for oversight, making rules for the Indian carbon market, guidelines regarding the sale of carbon credit certificates to outside India and other regulatory functions
    • Environment secretaries would be the ex-officio co-chairmen of ICMGB.
    • The ICMGB shall meet at least once in a quarter of every year
  • The Bureau of Energy Efficiency shall be the administrator for the Indian carbon market and shall also work as the secretariat for the ICMGB.
  • The Grid Controller of India Ltd shall be the registry for the Indian Carbon Market.
  • Central Electricity Regulatory Commission (CERC) shall be the regulator for the trading activities under the Indian carbon market

Types of carbon markets:

  • Compliance markets: created to comply with a law
  • Voluntary markets: Issuance, buying and selling of carbon credits, on a voluntary basis.

Features of The Energy Conservation (Amendment) Act 2022:

  • Establishes provisions for the establishment of carbon markets to encourage carbon trading and reduce carbon emissions.
  • Mandates the use of non-fossil sources such as green hydrogen, green ammonia, biomass, and ethanol for energy and feedstock.
  • Establishes a domestic carbon market in India.
  • Brings large residential buildings under the Energy Conservation regime to ensure energy efficiency.
  • Enhances the scope of the Energy Conservation Building Code to promote energy conservation in buildings.
  • Amends penalty provisions to ensure stricter enforcement of energy conservation measures.
  • Increases the number of members in the governing council of the Bureau of Energy Efficiency (BEE) to strengthen the agency’s capabilities.
  • Empowers the State Electricity Regulatory Commissions to make regulations for the smooth discharge of its functions related to energy conservation.
  • Enables the use of clean energy, including green hydrogen, to be mandatory to promote sustainable energy practices.


Insta Links

The Energy Conservation (Amendment) Bill, 2022


Mains Links

The carbon emissions trading mechanism can function as a policy instrument for managing greenhouse gas emissions, aiming to lower emissions and keeping the costs of overall emissions reduction at a minimum through market transactions. Critically examine. (15M)