According to a notification from the Bureau of Energy Efficiency (BEE) in December 2023, India must initiate its compliance market in the financial year 2025-26
India is in the process of determining emissions intensity targets for specific industries ahead of the 29th Conference of Parties (COP) in Baku, Azerbaijan. The country is also planning to establish a carbon market centred on compliance, requiring firms to achieve particular energy efficiency targets.
A senior official in the Environment Ministry told The Hindu that India is in the final stages of determining the carbon dioxide emissions intensity targets for certain industries before the upcoming COP 29 in Baku, Azerbaijan, next month.
Establishing specific numerical goals is necessary before creating a carbon market focused on compliance. This requires companies to make sure their carbon emissions intensity is below a certain limit or they will need to purchase credits from organisations with excess credits. One credit is given for every tonne of carbon dioxide saved beyond the goal. The cost of a credit is influenced by market conditions and regulatory influences and is determined by supply and demand dynamics. Emissions intensity refers to limits on the amount of carbon dioxide emissions released per unit of production.
"We expect a final position on this very soon. There are still discussions going on with industry, but we want to ensure that the final document is clear and covers all aspects," the official said in an interaction with The Hindu.
According to a notification from the Bureau of Energy Efficiency (BEE) in December 2023, India must initiate its compliance market in the financial year 2025-26.
The Indian carbon market is overseen by the National Steering Committee for Indian Carbon Market (NSC-1CM), with co-chairpersons from the Ministry of Environment, Forest and Climate Change and the Ministry of Power having direct oversight.
India plans to enhance its industrial emissions restrictions by enhancing the Performance, Achieve and Trade Scheme, requiring industries to meet specific energy efficiency goals. The industries predicted to fall under compliance regulations include aluminium, chlorine alkali, cement, fertiliser, iron and steel, pulp and paper, petrochemicals, petroleum refining and textiles. These industries are difficult to transition as the expense of implementing emissions-reducing technology is high.
Discussions at the Baku COP will mainly revolve around developed countries committing to a new financial target for transferring funds to developing nations. There is also a hope that carbon markets will receive official approval within the UN-supported climate agreements. A certain part within the 2015 Paris Climate Agreement, known as Article 6, outlines the parameters for implementing carbon markets, which allow for carbon trading between countries. There are still some unresolved matters regarding the accounting of these credits. The official mentioned that clarity will only arise when negotiations begin next month.