Carbon credits or carbon offsets, like plastic credit, allows the buyer/owner to emit a certain amount of carbon dioxide and other GHGs equivalent to the associated purchase or ownership. These allowances have shown empirical results in reducing measurable and verifiable emissions by incentivizing companies, in the form of a monetary compensation, to sell excess carbon credit to other producers.
The concept of carbon credits is based on the "cap-and-trade" model that was used to reduce sulfur pollution in the 1990s.
CAP AND TRADE
Cap-and-trade (also known as emissions trading scheme) is used as a regulatory program, often to replace an imposed tax on the emissions of a certain harmful chemical caused by the industrial activity of an organization.
It is used to gradually limit or cap the total emissions and the total “credit” store that companies have declines over time. This system pushes organizations to find alternatives that are not just cheaper but also more environmentally friendly.
INDIA’S CARBON CREDIT MARKET
India proposed The Energy Conservation (Amendment) Bill, 2022 in the Lok Sabha (the lower house of parliament) on 3 August. On 9 August 2022, this legislation was passed.
The bill aimed to ensure greater use of renewable energy. The bill also established a carbon trading scheme This scheme allows industries with a tradeable permit to produce a specified amount of carbon emissions.
DECARBONISING OPERATIONS
The new bill focusses on domestic carbon credit trade which is assisted by the government sanction to put a halt on the export of carbon credit all together unless its own climate goals are achieved.
Carbon credit emerged in the Kyoto Protocol in 1997 where carbon was deemed to be a traded commodity and this was reiterated during the Paris Agreement in 2015.
The amendments made to the bill aim to consolidate all sub species of trading systems already in place and streamline the issuance of energy certifications.
