CARBON MARKETS

• The Energy Conservation Bill, 2022 was passed in Parliament, despite the Opposition's demands to send it for scrutiny to a parliamentary committee.
• The Bill empowers the government to establish carbon markets in India & specify a carbon trading scheme.

• Article 6 of the 2015 Paris Agreement provides for the use of international carbon markets by countries to fulfil their Nationally Determined Contributions (NDC) to keep global warming within 2⁰ C.
• Carbon Markets are essentially a tool for putting a price on carbon emissions; they establish trading systems where carbon credits can be brought & sold.
• A carbon credit is a kind of tradable permit that, as per UN standards, equals one tonne of carbon dioxide removed/sequestered from the atmosphere.
• As per United Nations Development Programme (UNDP) reports, the interest in carbon markets is growing globally.
• 83% of NDCs submitted by countries mention their intent to make use of international market mechanisms to reduce greenhouse gas emissions.
• There are two types of carbon markets: i)Compliance Markets, ii) Voluntary Markets.
• Compliance markets, which are set up by policies at the national, regional & international level are officially regulated.
• Voluntary markets are those in which emitters-corporations, private individuals buy carbon credits to offset the emission of 1 ton of CO₂ /equivalent greenhouse gases.
• Such carbon credits are created by activities which reduce CO₂ from the air like afforestation.
• In voluntary market, a corporation looking to compensate for its unavoidable emissions, purchases carbon credits from an entity engaged in projects that reduce, remove, capture or avoid emissions.
• For example, in the aviation sector, airlines may purchase carbon footprint of the flights they operate.

• The UNDP pointsout serious concerns pertaining to carbon markets ranging from double counting of greenhouse gas reductions, quality & authenticity of climate projects that generate credits to poor market transparrency.
• There are concerns about 'greenwashing'-companies may buy credits, simply offsetting carbon footprints instead of reducing their overall emissions.

• The Bill empowers the Centre to specify a carbon credits trading scheme.
• Under the Bill, the central government will be able to issue carbon credit certificates.
• These carbon credit certificates will be tradeable in nature.
• Other persons would be able to buy carbon credit certificates on a voluntary basis.
• Opposition members pointed out that the Bill does not provide clarity on the mechanism to be used for the trading of carbon credit certificates & about who will regulate such trading.
• Questions are raised about the right Ministry to bring in a scheme of this nature, pointing out that while carbon market schemes in other countries are framed by their environment ministries, the Indian Bill was tabled by the Power Ministry.
• The Bill does not specify whether certificates under already existing schemes would also be interchangeable & tradeable with carbon credit certificates.
• Two types of tradeable certificates are issued in India-Renewable Energy Certificates (RECs) & Energy Savings Certificates (ESCs).