The Union government plans to set up an agency on the lines of National Agriculture Cooperative Marketing Federation of India (NAFED) to regulate carbon trading, two people said.
The new body will also be responsible for green initiatives such as green bonds. It comes in the backdrop of 29th session of the Conference of the Parties (COP29) to the UN Framework Convention on Climate Change (UNFCCC) taking the landmark decision to draw up rules for a global carbon market, that will allow nations to trade carbon credits.
Parliament passed the Energy Conservation (Amendment) Bill, 2022 on 12 December 2022, setting the stage for a carbon market in the country.
“The policy on carbon marketing, carbon taxing will emerge, and the ministry of power is working on it. If the policy comes into effect, there will be agencies which will completely control the carbonatizing market. Green also comes under the same category,” one person cited above said.
“The definition of green is down to what is internationally acclaimed green. Europe is so stringent about green that even if you produce hydrogen from natural gas, they say it is not green. For them, green is something that does not use anything from carbon and that could only be biomass, which is the most renewable,” the person added.
“Such stringent measures are coming, and India must oppose it. So, there has to be a body which will take care of that. As of today, it’s DPIIT (department for promotion of industry and internal trade). There is none under the energy sector as yet. There will be one when there will be something on carbon pricing.”
Empowering government
The amended Energy Conservation Act, 2022 empowers the Indian government to set up a domestic carbon market and to authorize designated agencies to issue carbon credit certificates (CCCs). Each CCC will represent one tonne of CO2 equivalent (tCO2e) reduction or removal from the atmosphere.
The Indian Carbon Market Framework has two key mechanism – a compliance mechanism which aims to address the emissions from its energy use and industrial sectors and offset mechanism to incentivize the voluntary actions from entities (not covered under compliance) for GHG reduction, thus providing a comprehensive approach to decarbonization of the economy.
The Bureau of Energy Efficiency (BEE) has a key role in administering the scheme and formulating the targets for the obligated entities under the scheme, and the Central Electricity Regulatory Commission (CERC) regulates the trading of carbon credit certificates.
India ratified the Paris Agreement on Climate Change in 2016, committing to limit the global average temperature rise to below 2°C by the end of the century. As part of its first Nationally Determined Contributions (NDCs), India pledged to reduce the greenhouse gas (GHG) emission intensity of its economy by 33-35% by 2030 from 2005 levels. In August 2022, the Indian government revised its NDCs, raising its ambition to a 45% reduction in GHG emission intensity by 2030 from 2005 levels. The third round of NDCs are due by February, valid till 2030.
Form like Nafed
“The agency may be a form like NAFED, but for green industrial development. There is a total bond market of $120 trillion globally. Out of that, $3 trillion are already green. Can you tap that money In India? That is the thing. As an economy, you can only do to an extent; You need money from outside. The government is trying to figure out if it can bring money in the name of green through an institution,” the other person said.
At present, the green finance working committee, under the finance ministry, oversees the issuance of sovereign green bonds.
As of July 2023, the global bond market was valued at $135 trillion, with rated corporate debt making up $23 trillion of the total. Green bond issuance reached a total of $575 billion in 2023, up 10% year on year, according to S&P Global while India’s $21 billion in green bonds represents a mere 2.2% of global issuances in 2023, despite its large economy and emissions.
Queries sent to the secretaries and spokespeople of finance, power, new and renewable energy and environment ministries remained unanswered at press time.
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