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News: The U.K. has recognised India’s CCTS for carbon pricing relief under its Carbon Border Adjustment Mechanism (CBAM).
About Carbon Credit Trading Scheme (CCTS)
- Carbon Credit Trading Scheme (CCTS) is a mechanism designed to reduce GHG emissions through carbon pricing.
- It laid the foundation for the Indian Carbon Market (ICM) by establishing its institutional framework.
- Legal Basis: It was notified by the Ministry of Power in 2023 under the Energy Conservation Act, 2001.
- Predecessor: CCTS supersedes the Perform, Achieve and Trade (PAT) scheme, which focused on energy efficiency through Energy Saving Certificates (ESCerts).
- Objective: It aims to decarbonize industrial sectors by shifting the focus from energy efficiency to GHG emissions intensity reduction.
- Institutional Structure
- Administrator: The Bureau of Energy Efficiency (BEE) sets targets and issues Carbon Credit Certificates (CCCs).
- Regulator: The Central Electricity Regulatory Commission (CERC) regulates CCC trading.
- Operational Mechanism:
- Coverage: The CCTS compliance mechanism initially covers nine energy-intensive sectors – alluminium, cement, chlor-alkali, pulp and paper, iron and steel, fertilizer, petroleum refining, petrochemicals, and textiles.
- Setting Targets: Obligated entities in these sectors are given sector-specific GHG emission intensity targets.
- Measuring Performance: Their performance is assessed against the prescribed emission intensity targets.
- Earning Credits: An entity that performs better than its target earns Carbon Credit Certificates (CCCs), with 1 CCC representing 1 tonne of CO₂ equivalent reduced.
- Buying Credits: An entity that fails to meet its target must purchase CCCs to meet its compliance requirement.
- Trading Credits: Earned CCCs can be traded on power exchanges, allowing entities that need credits to purchase them.
- Voluntary Participation: Entities outside the compliance mechanism can voluntarily reduce their emissions and earn carbon credits through the offset mechanism.
- CCTS Emission Accounting:
- Intensity-Based Targets: CCTS sets targets in tonnes of CO₂ equivalent per unit of product output.
- Scope of Emissions: It covers direct emissions from fuel combustion and industrial processes (Scope 1) and indirect emissions from electricity and heat consumption (Scope 2).
- Additional Emissions: Some Scope 3 emissions, including emissions from the import and export of intermediary products, are also considered.
