EDITORIALS & ARTICLES

Expanding the Indian economy, the green way

  • As India develops its economy to meet the growing needs of its people, it will confront major challenges due to climate change consequences and the allied necessity to curb carbon emissions.
  • The impact of global warming is becoming more severe, and there is an urgency to embrace practices that mitigate greenhouse gas (GHG) emissions.
  • Establishing a vibrant carbon trading network is one of the solutions that are being adopted or considered to tackle the emergency.

What are carbon credits?

  • Carbon credits can be considered like a temporary licence for an organisation to emit a specific quantity of CO2 in a particular year.
  • This mechanism allows a company with low or no emissions to sell credits in the market via a carbon trading framework or carbon exchange.
    • This offsets the emissions of another company willing to pay for the credits.

What is the need for a carbon credit mechanism?

  • With global temperatures and GHG emissions rising annually, there is an increased awareness amongst governmentsinvestorsconsumers and other stakeholders of their overall carbon footprint, and the need to control it.
  • Decarbonisation avenues are very limited for some industrial companies and hard-to-abate segments such as cement, chemicals, iron and steel production and non-ferrous metals.
    • Those avenues are also a costly proposition for them compared to transport, power generation and some other industries.
  • These companies are some of the biggest contributors to universal GHG emissions, hence they are mandated to meet emission reduction goals, because of either local laws or their in-house policies.

How will carbon credits help?

  • Carbon credits can assist companies in meeting sustainability targets.
  • Companies can purchase credits or fund programmes that create carbon credits.

What are steps taken by Government?

  • The Government is planning to set up the Indian Carbon Market (ICM) by establishing a national framework that will help in decarbonising the domestic economy by pricing GHG emissions via trading in carbon credit certificates.
  • India already has an energy savings-linked market mechanism.
    • However, carbon credit trading will give a fillip to energy transition due to its greater scope for covering the country’s potential energy segments.

Draft Framework for the Indian Carbon Credit Scheme 2023:

  • The draft framework for the Indian Carbon Credit Scheme 2023 was notified by the Union government.
  • The Bureau of Energy Efficiency functioning under the Ministry of Power has been tasked to develop the Carbon Trading Scheme in collaboration with the Ministry of Environment, Forest & Climate Change.

Working of ICM:

  • GHG emissions intensity targets and benchmarks would be developed in sync with the domestic emissions trajectory, according to the climate goals.
    • Consequently, carbon credit trades will be aligned as per the performance vis-à-vis the sectoral trajectories.
  • The draft notification has no provision for procedures, regulations or guidelines for the functioning of carbon markets.
    • This responsibility will be vested with a National Steering Committee chaired by the Secretary, Ministry of Power.

International Implications

  • It is essential to recognize that as carbon-related tariffs like CBAM (Carbon Border Adjustment Mechanism) begin to influence trade, businesses would need to factor in both national and international implications.
  • Given the interdependencies and complexity of the trade, it is challenging to accurately predict and model the impact.
  • Regulatory authorities must closely oversee the dynamics of the carbon credit market and devise systems to ascertain its smooth functioning on a global scale.

How will ICM help?

  • ICM will help mobilise investments for the transition to a low-carbon ecosystem.
  • It will help India lower the emissions intensity of its GDP by 45% by 2030 compared to the 2005 levels, thereby meeting its NDC (Nationally Determined Contribution) target related to its global climate commitments.
  • It will help in decarbonising the commercial and industrial segments and assist in meeting the ambitious target of turning net zero by 2070 set by the government.
  • It will offer flexibility to companies in hard-to-abate segments to augment their GHG emission efforts through carbon market credits.
  • The mechanism could help attract finance and technology for sustainable projects that can generate carbon credits.
  • It can be an effective channel in mobilising a major proportion of funds required for the low-carbon transition.

Impact of Introducing ICM

  • The Centre’s decision will create more awarenesschange and innovation across hard-to-abate industries.
  • Enterprises driven by incentives and penalties would begin embedding the environmental impact as a key parameter in their strategic decisions.
  • This will encourage investments allowing the shifting of business and manufacturing towards practices with low carbon footprints.

As the country moves steadily towards a net-zero worlddecarbonising industrial activity will be critical. It is here that industry leaders in carbon management solutions and clean energy transition can play a pivotal role in facilitating the transition towards a net-zero future by helping the nation switch from fossil fuel technologies to clean energy systems. As India tries to strike a balance between economic needs and environmental concerns, a vibrant carbon trading mechanism can be crucial in creating a more sustainable future.







POSTED ON 19-09-2023 BY ADMIN
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