Carbon: India plans its own uniform carbon trading market

India, the largest exporter of carbon credits, is proposing to have its own flat carbon market within a year as a major source of financing for energy transition and emission reduction projects.

An analysis by the Deloitte Economics Institute showed that the country could gain $11 trillion over 50 years if it limits rising global temperatures and realizes its potential to “export decarbonization” to the world.

The Center is considering a change in legislation to implement the carbon trading scheme that will include all current tradable certificates, the sources said. The proposal is also to have a closed market that does not allow the export of such clean certificates on international carbon markets, the sources said.

“The current schemes are very limited as the buyers are very limited. Once we open a formal carbon trading market, and we have the conversion factor of each such certificate into the amount of CO2 that has been avoided, the market will be very large. The market-determined price would reflect the real picture,” a senior government official said.

“Setting emission targets is not ruled out, but that will not happen any time soon. The market will allow green plants and energy efficient units to calculate profits through carbon trading. This will help drive and finance more such projects,” said.

The government is proposing to start with a voluntary market considering the net-zero announcements made by big corporations, he said. A gradual shift to ‘cap and trade’ is proposed, where industries receive emission targets as in the markets of the EU emissions trading system.

Under the current scheme of Perform, Market and Achieve, Energy Savings Certificates (ESCerts) are negotiated. Similarly, Renewable Energy Certificates (RECs) are traded to allow entities to meet renewable energy purchase obligations.

ESCerts trading has stopped due to low demand. Currently, the scheme covers 11 industries that account for almost half of industrial energy consumption. The industries are demanding that the scheme be expanded to cover more businesses such as transport and logistics and that sanctions be increased. The first trading cycle uncovered a price of Rs 1,200 per ESCert, equivalent to one metric tonne of oil equivalent. However, in the second cycle, low purchase offers resulted in a price drop to Rs 250 per ESC certificate.

The 0.8 tons of CO2 from the RECs, on the other hand, are traded monthly on energy exchanges and have a better price. In the last session. Solar RECs were traded at Rs 2,250 each and non-solar RECs at Rs 1,000.

Manish Dabkara, CMD and CEO of EKI Energy Services Ltd, said that compliance markets are more successful and offer better price discovery. Carbon credits originating in India are traded on voluntary international markets for between $0.5 and $15 per ton of CO2. China launched its carbon market early last year, he said.

Add Comment