Understanding Carbon Credit Trading: An In-depth Analysis of the New Scheme by the Power and Environment Ministries

The increasing awareness of the impacts of global warming and climate change has led governments and organisations across the world to devise strategies and policies to limit greenhouse gas emissions. One such strategy is the concept of carbon credits. But what are carbon credits? How do they function? How have they evolved? Let’s explore these questions and examine the new Carbon Credit Trading Scheme initiated by India’s Power and Environment Ministries.

What are Carbon Credits?

Carbon credits are a part of international emission trading norms. They give a country the right to emit one tonne of carbon dioxide or the equivalent of other greenhouse gases. The concept of carbon credits came into existence as a result of growing awareness of the need for controlling emissions.

The idea is simple – a business gets a certain number of carbon credits. If it does not use up all its credits (i.e., it emits less carbon), it can sell the surplus credits to another business. This way, the total carbon emitted stays below a certain level, but businesses that find it hard to reduce their emissions can still operate.

The Evolution of Carbon Credits

The concept of carbon credits emerged from the Kyoto Protocol, an international agreement between more than 170 countries, which recognized that developed countries are principally responsible for the current high levels of greenhouse gas emissions in the atmosphere.

Under the Kyoto Protocol, countries were divided into two groups. Developed countries, referred to as Annex 1 countries, were mandated to reduce their emissions to the levels specified for each of them. Developing countries had no mandated limits. The Kyoto Protocol introduced three market-based mechanisms – Emission Trading, Clean Development Mechanism (CDM), and Joint Implementation (JI) – to help stimulate sustainable development and reduce emissions more cost-effectively.

Carbon Credits in India

In India, the Bureau of Energy Efficiency (BEE) under the Ministry of Power, along with the Ministry of Environment, Forest & Climate Change, is developing the Carbon Credit Trading Scheme. The move is seen as a significant step towards decarbonising India’s economy and ensuring the country’s commitment towards its goals under the Paris Agreement.

The New Scheme by Power and Environment Ministries

The new carbon credit trading scheme by the Power and Environment Ministries is poised to provide a robust regulatory framework to facilitate the trading of carbon credits in India. This trading scheme seeks to encourage companies to reduce their carbon emissions by offering a monetary incentive for every tonne of carbon dioxide they save.

It also encourages renewable energy projects, waste heat recovery, and energy efficiency measures, as these will now contribute to an entity’s carbon credits. The ministries are working on the specifications of this scheme, and it is expected to be operational soon.

Implications of the Scheme

The scheme is expected to lead to significant carbon emission reductions, thereby aiding India in meeting its commitment to the Paris Climate Accord of reducing its carbon intensity by 33-35% by 2030. It will also incentivize businesses to adopt green technologies and practices and foster the growth of India’s renewable energy sector.

In conclusion, carbon credits and the impending carbon credit trading scheme have the potential to transform India’s approach towards sustainable development and climate change mitigation. While the scheme is expected to have significant economic and environmental implications, its successful implementation will ultimately depend on how effectively it is managed and regulated.

Key Features of Carbon Credits and the New Scheme