On 27th March 2023, the Ministry of Power released draft Carbon Credit Trading Scheme (“CCTS”) to establish a framework for the Indian Carbon Market (“ICM”). The proposed Energy Conservation (Amendment) Bill, 2022, which was passed by the Indian Parliament, empowers the Central Government to specify a Carbon Trading Scheme in consultation with the Bureau of Energy Efficiency. The key features of CCTS are as follows:
Indian Carbon Market Governing Board (“ICMGB”)
The draft proposes that the ICMGB would oversee the ICM, comprising of members from various relevant central ministries and agencies. The ICMGB shall discharge functions such as recommending procedures, rules and regulations for ICM, suggesting methods for voluntary mechanisms for the approval of Central Government, approval of projects under the voluntary mechanism, recommending the Central Government or its designated agency for issuance of Carbon Credit Certificate (“CCC”), approve the processes/conditions for crediting period/renewal/retirement of CCC, overseeing administrative and regulatory functions, constituting committees or working groups, and carrying out any other functions assigned by the Central Government.
ICM Administrator
The Bureau will serve as the administrator for the ICM and act as the secretariat for ICMGB. Its responsibilities include developing standards and processes for registering projects under the voluntary mechanism, issuing CCC, and developing market stability mechanisms. The Bureau will also recommend charges for ICMGB approval, develop the process for crediting period/renewal/retirement of CCC, undertake capacity-building activities, maintain the IT infrastructure, and coordinate committees and working groups.
ICM Registry
The Grid Controller of India will serve as the registry for the ICM, responsible for registering obligated and non-obligated entities, maintaining transaction records, and sharing them with the ICM administrator and Power Exchanges. The registry will also assist in developing the IT platform for maintaining the database of Carbon Credit Certificates, establishing linkages with other registries, and performing other functions assigned by the ICMGB or the administrator.
ICM Trading Regulator
The Central Electricity Regulatory Commission (“CERC”) shall be the Regulator for the trading activities under the ICM and shall be responsible for regulating CCC trading matters and frequency, safeguarding the interest of both buyers and sellers, and providing market oversight with corrective actions to prevent fraud and mistrust.
Technical Committee
The Bureau shall be responsible for constituting one or more technical committees for different areas as required under either the compliance or voluntary mechanism of the CCTS. Each technical committee would be chaired by a member who has the requisite knowledge for the specified area and respective sectors and consist of other members as required and shall make recommendations to the Bureau in respect of the matters assigned to it.
Accredited Carbon Verifiers
The Bureau will also specify the procedures and eligibility criteria for the accreditation of the agencies to function as accredited carbon verifiers and develop methodologies and detailed procedures for registering projects and issuing CCCs for different sectors with the support of the technical committees and submit the same to ICMGB.
Power Exchanges
The Commission shall approve participation of power exchanges for the purpose of ICM trading from time to time. The power exchanges shall perform functions regarding trading of CCC, in accordance with the regulation notified by the Commission and shall seek approval of the Commission for their respective bylaws and rules for trading of certificates.
Compliance Mechanism
The obligated entities including the designated consumers covered under the compliance mechanism, shall be required to register themselves for CCTS, and shall be required to reduce GHG emission intensity in terms of tCO2e/tonne of production.
Detailed Procedures
ICMGB and other authorities shall develop detailed procedure for operationalizing ICM and related mechanisms. This procedure will cover aspects such as CCC issuance criteria, validity of CCC, pricing details, submission requirements, monitoring, reporting and verification, and other compliance-related incidental matters.
Voluntary Mechanism
The Bureau shall develop methodologies and detailed procedure for registration of projects and issuance of CCCs for different sectors, with the support of technical committees and submit the same to ICMGB.
The Ministry of Power has sought comments from chief and principal secretaries of all states, industry associations and all stakeholders which can be submitted latest by April 14, 2023.
