Carbon Market UPSC (Carbon Credit Market In India)

Explained: What is Carbon Market, and Why does India want to create one?

News: Passed the Energy Conservation (Amendment) Bill, 2022 on 12 December. The Bill amends the Energy Conservation Act, of 2001 to enable the government to set up a carbon market in India and specify a carbon credit trading scheme. This amendment will empower the government to set up a carbon market in India.

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Energy Conservation and Energy Efficiency

  • “Energy Conservation” – Using Less Energy
  • “Energy conservation on a large scale leads to energy conservation”
  • Energy Conservation The ultimate goal is to reach sustainable energy use
  • Significantly, this is distinct from the term ‘Energy efficiency‘, which refers to technology that requires less energy to do the same amount of work.

What is Carbon market?

A carbon market is a system in which governments, organizations, and individuals can buy and sell emission allowances, which represent the right to emit a certain amount of carbon dioxide or other greenhouse gases.

Carbon markets aim to provide financial incentives for companies and individuals to reduce their greenhouse gas emissions by emitting pollutants and to make it less expensive to invest in clean energy and energy efficiency technologies. It is often used as a tool to mitigate the effects of climate change.

Simple Word:- One credit allows the emission of one tonne of carbon dioxide or other greenhouse gas equivalent. 

 A set permit is given by the government to any company for pollution. If the same government gives 10 credits to a company, then that company can release 10 tonnes of carbon into the environment.

One Credit 1 tonne
Ten Credit 10 tonne

 A company has got 10 credits from which it can release 10 tonnes of carbon in the environment, if the company releases 8 credits of carbon in the environment, then its 2 credits are left which it can sell to another company in the market. Another company that has got 10 credits and has to release as much carbon as 12 credits, can buy 2 credits from another company.

Energy Conservation Act 2001

Energy Conservation Act 2001” is a law enacted in India that is designed to conserve and promote energy resources. The Act protects resources that may cause some harm to the environment, examples include energy, power, clean energy, environmental protection, enrichment, and material security.
  • Energy efficiency norms have been set
  • Establishment of Energy Efficiency Bureau (1 March 2002)
  • Prohibited until conforming to specified criteria(The Act allows the Center to restrict the manufacture, sale, and buyer import of any particular equipment)

Energy Conservation (Amendment) Bill 2022

  • There will be a limit on energy use
  • Ratings will be given for motor vehicles, ships, industrial units, and buildings.
  • Restrictions or fines will be imposed for not following energy standards
  • Incentives for clean energy (Carbon Savings Certificate)
  • Carbon Credit

Kyoto Protocol and Credit

Carbon Market was recognized as a tradable commodity when the Kyoto Protocol was signed in 1997. This was ratified in the 2015 Paris Agreement.

  • carbon emission target of developed countries
  • 1 carbon credit = 1 Ton

Domestic carbon market

  • Carbon credits will be traded
  • Carbon credit will be less and energy efficiency will be

Benefits Of Carbon Credits

  • Carbon is traded internationally in exchange for carbon credits
  • Encourages nations to spend on eco-friendly initiatives and activities that benefit nature
  • It has encouraged the development of renewable projects all over the world
  • This will help mitigate climate change and put India on track to achieve its net-zero goals.

Target Of India 

The Indian government is trying to create a market for carbon credits. India recently updated its NDC targets to reduce emissions by 45%, generate 50% of electricity from renewable energy sources and reach net zero emissions by 2070.

India target before

In the past, India has invested in producing carbon credits and exporting them to international enterprises. Between 2010 and June 2022, India issued 35.94 million carbon credits or about 17% of all voluntary carbon market credits issued globally. The market for carbon credits is to grow by 164% globally in 2021. It is estimated to reach 100 billion dollars by 2030.

Consider the following statements:

1. Climate Club was established under Energy Conservation Act 2001
2. The concept of carbon credits first appeared under the Paris Climate Agreement.

Which of the above is the correct statement?
1. Only 1
2. Only 2
3. Both 1 and 2
4. None of these

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