India is in its final stages before the launch of the nation’s Emissions Trading Scheme (ETS), as government officials prepare to announce the sectors it will cover.
The ETS will require heavy emitters to meet certain energy efficiency standards, which, in turn, will allow them to potentially profit from.
Namely, if a business is able to not only meet but exceed these targets, it would be eligible for credits or certificates that can been sold via the ETS to companies that have, in contrast, failed to reach said energy efficiency targets.
According to information shared with The Hindu by state officials affiliated to the Power Ministry and Environment Ministry, the sectors covered by the new ETS in India will be specified no later than June 2023.
Once launched, the scheme will be overseen by the Bureau of Energy Efficiency (BEE), a Ministry of Power body.
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Emissions trading schemes have already been deployed in other parts of the world, most notably in the EU and in South Korea.
However, there will be certain differences in the way that India’s ETS is expected to operate, compared to, for example, the European ETS.
One main difference between the two schemes is that in the EU, the scheme requires that companies reduce their absolute CO2 emissions, whereas this will not be the case for India.
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Instead, as long as the nation can reduce its carbon dioxide emissions per unit of GDP, it will be possible for companies to increase their production capacity and emit more CO2 while still being more efficient.
Analysts at the Council for Energy, Environment and Water (CEEW), Nishtha Singh and Vaibhav Chaturvedi, described the launch of a carbon trading scheme in India as a ‘pathbreaking one’ in a policy paper.
“Indian stakeholders should view the domestic ETS as an instrument for decarbonisation and domestic climate finance rather than international climate finance,” they said.