Carbon trading

#GS 03 Climate Change

Carbon markets are a tool for reducing carbon emissions by allowing the trade of carbon credits hence making green technology profitable.
It is done by establishing trading systems where carbon credits or allowances can be bought and sold.
A carbon credit is a type of tradable permit that is evaluated as per United Nations standards as equal to one tonne of carbon dioxide removed, reduced, or sequestered from the atmosphere.
Meanwhile, Carbon allowances or caps are determined by countries or governments according to their emission reduction targets.
Article 6 of the Paris Agreement allows the use of international carbon markets by countries to fulfil their Nationally Determined Contributions.

Indian Parliament passed the Energy Conservation (Amendment) Bill, 2022 in order to establish Carbon Markets in India and specify a Carbon Trading Scheme.
The Bill empowers the Union Government to specify a carbon credits trading scheme.
As per the Bill, the central government or an authorised agency will issue carbon credit certificates to companies or individuals who registered and are compliant with the scheme.
These carbon credit certificates will be tradeable in nature and will allow other persons to buy carbon credit certificates on a voluntary basis.
The Central Electricity Regulatory Commission (CERC) was designated to be the regulator and that the carbon price was to be market determined.
The Bill also covers large buildings i.e., those with connected load of 100 kilowatt and above for compliance with energy conservation and sustainability codes.
EU-Emissions Trading Systems (ETS) is an exemplary example for the creation of a Carbon Market.
Under ETS, the emission limits on industrial sectors require industries to either cut emissions or buy government-certified permits from companies that cut more emissions than required or were auctioned by governments.

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