Expanding the Indian economy, the green way

Source– The post is based on the article “Expanding the Indian economy, the green way” published in “The Indian Express” on 15th September 2023.

Syllabus: GS3- Environment

Relevance- Issue related to climate change

News– The Centre is planning to set up the Indian Carbon Market (ICM) by establishing a national framework that will help in decarbonising the domestic economy by pricing GHG emissions via trading in carbon credit certificates.

What is the carbon credit?

A robust carbon trading network is one of the solutions to address the climate emergency.

Carbon credits are temporary “permits” that allow an organization to emit a specific quantity of CO2 in a given year.

This system enables companies with low or no emissions to sell these credits on the market through a carbon trading framework or carbon exchange. By doing so, they can compensate for the emissions of another entity that is willing to purchase these credits.

What is the importance of carbon credit?

Certain industrial companies and sectors such as cement, chemicals, iron and steel production, and non-ferrous metals are facing challenges to decarbonize. They have limited options.

Decarbonization in these industries is more costly compared to sectors like transportation and power generation.

Carbon credits offer a valuable means for companies to achieve their sustainability objectives. These organizations can either acquire carbon credits or support initiatives that generate carbon credits.

What are some facts about the Indian Carbon Market (ICM) being planned by the Indian government?

The draft framework for the Indian Carbon Credit Scheme 2023 has been recently released by the central government.

The Bureau of Energy Efficiency has been assigned the responsibility of developing the Carbon Trading Scheme in collaboration with the Ministry of Environment, Forest & Climate Change.

The Centre’s draft notification does not include provisions for the procedures, regulations, or guidelines governing the operation of carbon markets. This responsibility will be entrusted to a National Steering Committee chaired by the Secretary of the Ministry of Power.

ICM will be subject to regulation. It will also offer flexibility to companies operating in challenging-to-decarbonize sectors.

What are the benefits associated with the Indian Carbon Market?

First, ICM will attract investments for transitioning to a low-carbon ecosystem. It will also enable India to achieve its target of reducing the emissions intensity of its GDP by 45% by 2030, compared to the 2005 levels.

Second, the introduction of carbon credit trading will provide a significant boost to the energy transition efforts due to its broader coverage of potential energy sectors across the country. The Indian Carbon Market (ICM) will play a significant role in decarbonizing the commercial and industrial sectors.

Third, The decision by the Centre will also lead to increased awareness, transformation, and innovation within industries that are difficult to decarbonize. Companies motivated by incentives and penalties will start incorporating environmental impact as a critical factor in their strategic planning.

As carbon-related tariffs like the Carbon Border Adjustment Mechanism (CBAM) begin to exert a direct influence on trade, businesses will need to consider both domestic and international repercussions.