The Indian government, aiming to meet its Nationally Determined Contribution (NDC) targets, has established the Indian Carbon Market (ICM). Central to this initiative is the Carbon Credit Trading Scheme (CCTS), designed to incentivize the reduction of greenhouse gas (GHG) emissions across various sectors. Here’s a detailed look at how the compliance mechanism operates under the CCTS:
Introduction to CCTS
The CCTS, notified by the Indian government in June 2023 under the Energy Conservation Act, 2001, sets the stage for a regulated carbon market in India. The scheme facilitates the reduction of GHG emissions by pricing carbon credits, thus encouraging entities to lower their carbon footprints.
Key Elements of the Compliance Mechanism
- Obligated Entities and Targets:
- Identification: Entities within energy-intensive sectors are identified as ‘obligated entities’ by the Ministry of Power, based on recommendations from the Bureau of Energy Efficiency (BEE) and the National Steering Committee for the Indian Carbon Market (NSC-ICM).
- Targets: These entities are assigned GHG emission intensity targets (measured in tCO2e per unit of output) for a defined period. These targets are revised periodically to ensure continuous progress.
- Emission Intensity Trajectory:
- The emission intensity trajectory for each sector is developed, considering the potential for GHG reduction, available technology, and the associated costs. This trajectory guides the setting of specific targets for obligated entities, aiming to align with India’s NDC commitments.
- Monitoring and Reporting:
- Monitoring Plans: Each obligated entity must develop a comprehensive monitoring plan detailing how GHG emissions are measured and controlled within their operations.
- Reporting: Entities are required to submit annual reports detailing their GHG emissions and intensity. This data is essential for verifying compliance and issuing carbon credits.
- Verification and Assessment:
- Independent Verification: The GHG emission reports submitted by obligated entities are subject to independent verification to ensure accuracy and transparency.
- Performance Assessment: Verified data is used to assess whether entities have met their emission intensity targets.
- Carbon Credit Certificates (CCC):
- Issuance: Entities that exceed their targets (i.e., lower GHG emissions than required) are awarded CCCs, representing the surplus reduction achieved.
- Surrender: Conversely, entities failing to meet their targets must purchase and surrender CCCs equivalent to the shortfall. This ensures accountability and encourages continuous improvement.
- Trading and Banking:
- Trading Platform: CCCs can be traded on an exchange, allowing entities to buy or sell credits based on their performance.
- Banking: Surplus CCCs can be banked for future use, providing flexibility to entities in managing their compliance obligations.
Governance and Oversight
The NSC-ICM, chaired by the Secretary of the Ministry of Power and co-chaired by the Secretary of the Ministry of Environment, Forestry, and Climate Change (MoEFCC), oversees the functioning of the ICM. The committee ensures that the compliance mechanism operates efficiently, addressing any challenges and making necessary adjustments.
Conclusion
The compliance mechanism under the CCTS is a robust framework designed to drive significant reductions in GHG emissions across India. By setting clear targets, monitoring performance, and facilitating the trading of carbon credits, the CCTS encourages both private and public entities to actively participate in the country’s journey towards a low-carbon future.
This comprehensive approach not only aligns with global climate goals but also positions India as a proactive player in the global carbon market. Through continuous innovation and stringent compliance, the CCTS aims to achieve substantial environmental and economic benefits, contributing to sustainable development and climate resilience.
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