Hyderabad: In a major step toward tackling climate change, India has introduced two key guidelines that will shape the future of its emerging carbon market.
The Bureau of Energy Efficiency (BEE) has unveiled the Detailed Procedure for Compliance Mechanism and the Accreditation Procedure and Eligibility Criteria for Accredited Carbon Verification Agencies, here at a workshop held today. They are aimed at regulating carbon credit trading and encouraging businesses to reduce their greenhouse gas (GHG) emissions.
These guidelines are expected to drive India’s efforts to meet its Nationally Determined Contributions (NDCs) under the Paris Agreement, which include reducing the emission intensity of its GDP by 45% by 2030 and achieving net-zero emissions by 2070. To spread awareness among stakeholders, BEE organized the first National Workshop in Hyderabad, with upcoming workshops scheduled in Bhubaneswar, Mumbai, and Chandigarh.
The Indian Carbon Market (ICM) is at the heart of India’s strategy to reduce its GHG emissions. It allows companies to trade carbon credits—permitting businesses that exceed their emission reduction targets to sell credits to those that fall short. This trading mechanism incentivizes industries, such as steel, cement, textiles, and paper, to adopt greener technologies and practices.
India’s move towards a carbon trading framework received a significant boost with the amendment of the Energy Conservation Act in 2022. This amendment paved the way for the creation of the Carbon Credit Trading Scheme (CCTS), which governs carbon trading activities in the country. The scheme is built on two pillars: compliance and offset mechanisms.
The compliance mechanism sets specific Greenhouse Gas Emission Intensity (GEI) targets for high-emission industries. Companies that surpass these targets can earn carbon credits, while those that fall short must purchase credits to make up for their excess emissions. The offset mechanism expands the market by allowing renewable energy projects and other sectors to voluntarily participate, thus increasing the availability of carbon credits.
The Detailed Procedure for Compliance Mechanism provides clear instructions for companies on how to monitor, report, and verify their GHG emissions. This process ensures transparency and accountability, enabling fair trading of carbon credits. By setting up a system where businesses can both sell excess credits and purchase them to meet regulatory requirements, the framework incentivizes emission reductions in a cost-effective manner.
The Accreditation Procedure outlines the eligibility criteria for Accredited Carbon Verification Agencies (ACVs). These third-party agencies will audit and verify companies’ emission reduction claims, ensuring the integrity and accuracy of the system. The establishment of ACVs promotes trust in the carbon market, as it guarantees that reported reductions are genuine and measurable.
BEE, the organization responsible for overseeing the ICM, is developing an ICM Portal—a digital platform that will streamline carbon credit trading. It is also working with the Central Electricity Regulatory Commission (CERC) to draft regulations governing the market. These efforts are aimed at making carbon trading a seamless and transparent process, facilitating India’s transition to a low-carbon economy.
The workshop held in Hyderabad saw participation from a range of industries, which expressed confidence in the role southern states will play in implementing the carbon market. Telangana, Andhra Pradesh, Kerala, Karnataka, and Tamil Nadu, with their robust industrial bases and focus on adopting new technologies, are expected to be key players in this initiative.
Vavilla Aneela, Managing Director of Telangana State Renewable Energy Development Corporation (TSREDCO), emphasized that Telangana’s State Designated Agency (SDA) is ready to promote the carbon credit trading scheme. Aneela noted that the SDA will work closely with BEE to disseminate information to stakeholders about India’s Carbon Credit Trading Scheme 2023, notified under the Energy Conservation Act, 2001. This communication strategy will help ensure that all relevant industries and organizations are aware of the provisions and can actively participate in the ICM.
As India continues to refine its carbon trading framework, these new guidelines offer a blueprint for creating a sustainable and economically viable path to achieving its climate goals. Through collaboration between industry and government, the Indian Carbon Market could become a powerful tool in the global fight against climate change.
