The Ministry of Power has brought in amendments to the carbon credits trading scheme (CCTS) which paves the way for India to have its own standards for carbon trading and also allows non-obligated entities to generate carbon credits. 

The amendment notification dated December 19 asks the carbon credits administrator, the Bureau of Energy Efficiency (BEE), “to develop the standards and register the project under offset mechanism.” It also tasks the Bureau with “validation” of carbon credits, as opposed to only “verification” in the original ‘carbon credits trading scheme’ notification of June 28. 

Carbon credit market

Further, the amendment seeks to deepen the Indian carbon credit market by allowing ‘non-obligated entities’ to also register decarbonisation projects and generate carbon credits. Earlier, they could only purchase the credits. (‘Obligated entities are entities that are under a legal obligation to limit the carbon footprint of their activity to a prescribed level. Non-obligated entities are those that are under no such obligation.) 

“The non-obligated entities can register their projects as per the published sectoral methodologies for greenhouse gases emission reduction or removal or avoidance for seeking issuance of Carbon Credit Certificates,” the amendment notification says. 

To facilitate non-OEs to generate credits, the amendment brings in an “offset mechanism”. It explains “offset mechanism” as “mechanism under this Scheme where the non-obligated entities can register their projects for accounting greenhouse gases emission reduction or removal or avoidance for issuance of Carbon Credit Certificates.” 

Non-obligated entities

Now, unlike the obligated entities, non-obligated entities do not have a prescribed limit for their greenhouse gas emissions—if they had, they could over-achieve and earn carbon credits. Then on what basis would the non-OEs be issued certificates? The answer to this has been left to the Bureau of Energy Efficiency (BEE). The notification says: “The Bureau shall identify the sectoral scope and methodologies to be used under offset mechanism with the support of respective technical committees.” 

After BEE comes out with standards, Indian entities won’t have to go overseas standards agencies—think of them as rating agencies—for validating their carbon credits, industry experts told businessline today. The value of the credits depends a lot on who certifies them and on what standards. Going to as overseas standards body, such as the ‘Gold Standard’, is expensive and time consuming—could cost about $ 35,000 and take over a year. When India has its own standards, it would be a big help to Indian carbon credits generators; even foreign decarbonisation projects can come to India for certification, the experts said.  

Reacting to the amendment, Manish Dabkara, Chairman and Managing Director of the BSE-listed EKI Energy Services, a company that facilitates carbon trading—today said that the inclusion of ‘offset mechanism’ and provision for non-OEs to participate in the carbon credits trading scheme is a “progressive step that will usher in new opportunities for Indian decarbonisation project developers within the national carbon market.” Dabkara also called upon BEE to “promptly establish sectoral scopes, standards and methodologies.”