It’s high time for improvisation on Carbon credits
Vijay Kumar H K
Carbon credits, also known as carbon offsets are permits that allow the owner to emit a certain amount of carbon dioxide or other greenhouse gases. One credit permits the emission of one ton of carbon dioxide or the equivalent in other greenhouse gases. The carbon credit is half of a so-called cap-and-trade program. Companies that pollute are awarded credits that allow them to continue to pollute up to a certain limit, which is reduced periodically. Meanwhile, the company may sell any unneeded credits to another company that needs them. Private companies are thus doubly incentivized to reduce greenhouse emissions. First, they must spend money on extra credits if their emissions exceed the cap. Second, they can make money by reducing their emissions and selling their excess allowances.
The carbon credit exchange will play a key part as the national trading mechanism to monitor and analyse country’s greenhouse gas emission reduction. Our country is one of the world’s biggest greenhouse gas emitters and we are aiming to reach net zero emissions by 2070. To achieve this the lower house of parliament passed an Energy Conservation (Amendment) Bill 2022 in August that seeks to establish carbon credits trading. Experts say that Under a carbon trading scheme, government should encourage more and more private entities so that they can earn carbon credits by reducing their greenhouse gas emissions. The same credits can be bought and sold in markets. India has to become an industrial powerhouse while cutting emissions by 100 million tonnes a year by 2028, highlighting the importance of a robust carbon trading market.
A domestic market that is formed in cooperation and close consultation with relevant industry stakeholders can tremendously accelerate the country’s transition to become carbon neutral as per environmental studies.
India’s green energy companies, such as Adani Green and carbon off-setters like EKI Energy Services, Hero Future Energies, Ayana Renewable Power and global private equity major, KKR’s Virescent Infra
have come together to develop a carbon credit market to help achieve energy transition goals. But more companies should come together to develop carbon credit market.
The government has to take measures imperatively to make our market more for carbon credit so that it can be utilised to meet the country’s Nationally Determined Contribution (NDC) under the Paris Agreement goals. Our country should have supporting platforms which will allow firms and government agencies to buy and sell carbon credits and track their emissions on an online dashboard. The carbon credits if generated it will be first used to meet the country’s NDC goals as per Indian Ministry of Renewable Energy. The remaining can be sold outside the country.
According to the updated NDC, India now stands committed to reducing the emissions intensity of its GDP by 45 per cent by 2030, from the 2005 level, and achieving about 50 per cent cumulative electric power installed capacity from non-fossil fuel-based energy resources by 2030.Our country should put a step forward towards its long-term goal of reaching net zero by 2060 and not 2070.We should emphasize system of the carbon market. We have to have some sort of carbon market every year improving so that carbon credits improve.
We have to keep carbon credits to ourselves to achieve NDCs but anything beyond that can be sold anywhere in the world. So other countries can look forward to huge quantities of carbon credits being available in our country we should take strict measures to diversify its supply chain in the area of solar manufacturing.
Energy crisis in Europe is a concern. It is something which is a result of the ongoing conflict (between Russia and Ukraine) and supply chains getting disrupted. Such disruptions can happen at any time. One needs to diversify supply chains that not only go for petroleum products but also for polysilicon to solar modules. We have to take steps to ensure that supply chains are diversified so that it leads to carbon credits.
We have to come up with a Production Linked Incentive for manufacturing polysilicon cells to solar modules. The activities should pave the way for India to try to become a carbon-trading hub for Asia. India should join existing carbon exchanges in other Asian markets including China and Singapore, which plans to launch futures trading as early as possible so that the companies look to hedge risks from greenhouse-gas emissions. Japan and Malaysia are planning similar exchanges.
Another method, which will require changes in the energy and transport sectors, should be supported by growing embrace of electric vehicles. We have to make a pledge to achieve net zero emissions by 2070 joining a global commitment to cap warming to less than 3 degree Celsius above pre-industrial levels.
The writer is a freelance columnist
