CARBON MARKETS

Aug. 6, 2022

The creation of a domestic carbon market is one of the most significant provisions of the proposed amendment The Energy Conservation (Amendment) Bill, 2022.

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Carbon markets allow 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.
Under the Kyoto Protocol, the predecessor to the Paris Agreement, carbon markets have worked at the international level as well.
Domestic or regional carbon markets are already functioning in several places, most notably in Europe, where an emission trading scheme (ETS) works on similar principles.
A similar scheme for incentivising energy efficiency has been running in India for over a decade now. This BEE scheme, called PAT, (or perform, achieve and trade) allows units to earn efficiency certificates if they outperform the prescribed efficiency standards. The laggards can buy these certificates to continue operating.

Source : Indian Express