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As an increasing number of companies continue to pledge to reduce their greenhouse gas emissions and adopt climate best practices, carbon markets have been experiencing a steady surge in demand. In the last decade, the world has greatly evolved to see climate action as a dire step to restore and rehabilitate the planet. The objective is clearly protection over profit and in this quest mankind has come together like never before with a common goal of net zero.
A carbon credit can enable climate action:
Today, businesses increasingly understand climate nuances and the need for urgent climate action and there has been a growing adoption of carbon offsets to neutralize carbon footprints with an aim to restore the planet. This has resulted in exponential growth of the global carbon credit market. A carbon credit is an offset mechanism that is issued for an equivalent avoidance or absorption of carbon emissions in the atmosphere as a result of a targeted carbon reduction project. These issued credits are then supplied to anyone and everyone aiming to reduce their carbon footprint. So carbon credits are a way to reduce your carbon footprint caused by unavoidable emissions. By purchasing carbon credits, businesses essentially invest in other projects that help reduce greenhouse gas emissions.
National ETS through Energy Conservation Act 2022:
The Act was first enacted in 2001 and provides a legal framework and regulatory guidelines at the Central and State level for the efficient use of energy and its conservation. The proposed amendments to the Act that has been passed in Lok Sabha will empower the country to increasingly strive towards its net-zero commitment of 2070 with the further implementation of NDCs in a timely manner. It will also facilitate the development of India’s carbon market which will in turn enable the country to transition into a low-carbon economy. With the proposed amendments, the prevalent trading schemes in India – Energy Saving Certificates (ESCerts) and Renewable Energy Certificates (RECs) will be merged into one single commodity that will be called Carbon Credits Certificate (CCC) and will operate under Cap & Trade system under the National ETS.
A National ETS will further accelerate this journey since more trade of carbon credits would imply more carbon reduction in the country. The Energy Conservation (Amendment) Bill will also bring fair play and increased transparency, enabling all stakeholders with equal opportunities. The amendment act will unlock new market potentials for both the sellers and buyers of credits in India. Though the market will largely be voluntary in nature to begin with, once it becomes mandatory for a specific sector(s), the scheme will remain open for the Indian Voluntary Market buyer as mentioned in the EC Act 2022. This will open the market for newer avenues and is expected to unleash a new era of environmental activism in India even as the demand for Voluntary Carbon Credits grows exponentially in the country.
Heading To a Low-Carbon Future:
Carbon markets have been successful in controlling GHG emissions by enabling their trading to achieve emission limits. With the implementation of the National ETS, the domestic carbon credits market will enable the development of higher quality sources of carbon credits, benefitting both buyers and sellers and ultimately, supporting progress toward a low-carbon future. In conjunction with the International Carbon Markets, India’s domestic market can play a key role in reducing global greenhouse gas emissions and enabling the larger goal of rehabilitating the entire planet.
The article has been authored by Mr. Manish Dabkara, Chairman & MD Eki Energy Services Ltd.