Obligated entities under the compliance regime will be assigned a fixed number of credits, offering flexibility to purchase more or sell surplus credits, fostering emission reduction

The Power Ministry, in collaboration with the Bureau of Energy Efficiency (BEE), has recently revised the Carbon Credit Trading Scheme (CCTS), initially notified in June last year under the expanded Energy Conservation Act.

The amended CCTS introduces an offset mechanism along with the existing compliance regime. The scheme, aimed at decarbonising the Indian economy, allows non-obligated entities to voluntarily register projects in specified sectors for tradable carbon credit certificates (CCCs). These certificates, denoting the reduction, removal, or avoidance of greenhouse gas emissions, are issued following evaluations by BEE-accredited agencies.

Before the amendment, the CCTS lacked a specific offset mechanism for non-obligated entities, merely allowing them to purchase CCCs. The updated scheme expands the scope, enabling these entities to register projects for CCC generation. The primary goal is to efficiently price emissions through CCC trading, with each certificate representing one tonne of carbon dioxide equivalent (tCO2e).

Obligated entities under the compliance regime will be assigned a fixed number of credits, offering flexibility to purchase more or sell surplus credits, fostering emission reduction.

In the voluntary carbon market, businesses can trade CCCs to offset emissions voluntarily. Offsets can be generated by financing projects that reduce GHGs elsewhere, such as reforestation, wetland restoration, or innovative technologies. The offset, once granted, can be sold to third parties, allowing entities to reduce their carbon footprint.

While voluntary markets encourage innovation and flexibility, certain sectors, like cement or steel production with hard-to-abate emissions, face challenges in meeting reduction targets. The suggestion to allow trading of energy-saving certificates (ESCerts) and renewable energy certificates (RECs) as offsets further adds to the ongoing discourse surrounding India’s carbon credit.