The government wants to strengthen a 20-year-old law called the Energy Conservation Act of 2001, which has powered India’s first steps toward a more energy-efficient future. This will make it easier to reach more ambitious climate change goals and move more quickly to a low-Carbon Market economy.
How do Carbon Markets work?
With the goal of lowering emissions as a whole, carbon markets make it possible to trade carbon credits. These markets give people reasons to cut down on pollution or make their homes use less energy.
For example, a factory that does better than the standards for emissions could get credits. Another unit that is having trouble meeting the requirements can buy these credits to show that it meets these requirements.
The unit that did better on the standards makes money by selling credits, while the unit that buys them is able to meet its operating obligations.
How are Carbon Markets doing on a global scale?
Under the Kyoto Protocol, carbon markets have also been able to work on an international level. A group of developed countries were given goals for cutting their emissions by the protocol. Other countries didn’t have these kinds of goals, but if they cut their emissions, they could earn carbon credits.
Then, these carbon credits could be sold to developed countries that were supposed to cut their emissions but couldn’t. For a few years, this system worked well. But the market fell apart because carbon credits were not being bought.
The new Paris Agreement is supposed to have a carbon market like the old one, but the details are still being worked out.
Europe: ETS stands for “emission trading scheme.” Under this plan, factories in Europe have to meet certain emission standards and can buy and sell credits based on how well they do.
India: A program called PAT is in place (or perform, achieve and trade). It lets units get efficiency certificates if they do better than the standards for efficiency. The ones who are behind can buy these certificates so they can keep doing business.
What is the goal of the Bill?
With this change to the Energy Conservation Act, a new carbon market would be made that would cover a much bigger area. Even though we don’t know all the details of this carbon market yet, it is likely to work like the European ETS and make it easy to buy and sell carbon credits.
Carbon market is once again a word that people all over the world are talking about. This is because companies are paying more attention to their net zero goals and countries are getting serious about their climate commitments under the Paris Agreement. It is seen as one of the best ways to price greenhouse gas (GHG) emissions and reach climate goals through the market. Since the Clean Development Mechanism was started by the United Nations in 2006, the carbon market has been running. In its new form, the carbon market has changed.
How does India benefit from it?
There are two kinds of carbon markets: the compliance market, where people trade carbon emissions because they have to, and the voluntary market, where people trade carbon emissions because they want to (resulting from voluntary climate commitments by corporations). Since the middle of the 2000s, the compliance market, which is mostly driven by emission trading systems (ETSs), has been in place. However, the voluntary carbon market (VCM) has been growing in popularity over the past few years.
The VCM is run by companies and industries in hard-to-control sectors that rely on carbon credits to reach their “voluntary” but very ambitious climate goals. This market grew by more than 60% from 2020 to 2021, when it was worth $1 billion. By 2030, it is expected to be worth at least $50 billion. One thing that makes VCM different is that projects that have co-benefits like biodiversity conservation, gender equality, and community economic development are charged more. Depending on the types of co-benefits, the prices of carbon credits for these projects can range from $5/tCO2e (agriculture, forestry, etc.) to $25/tCO2e (clean cooking for low-income households) (1 tCO2e is equal to 1 carbon credit).
Carbon credits can bring in extra money, which could completely change the economics of key activities like farming, forestry, cooking, and waste management. This could have a big impact on society, the economy, and the environment. These things can either take carbon out of the air or keep it from going into the air by using better methods and technologies. They are a big part of giving local communities more power by:
Acting as an extra source of income for smallholder farmers and creating co-benefits, like jobs for local people, are two examples of co-benefits. If mangroves are planted, they can protect coastal areas and local communities from bad weather.
Increasing farm productivity by improving the watershed, making the microclimate cooler, stopping soil erosion, and increasing biodiversity.
