Context:
India has announced emissions intensity of production targets under the CCTS for eight heavy industrial sectors:
- Aluminium
- Cement
- Paper and Pulp
- Chlor-alkali
- Iron and Steel
- Textile
- Petrochemicals
- Petroleum Refineries
These sectors are part of India’s compliance carbon market, where companies that beat their emission reduction targets can trade excess credits.
India’s Carbon Credit Trading Scheme (CCTS) & Carbon Pricing Framework
What is CCTS?
- CCTS = Market-based mechanism under Indian Carbon Market (ICM) for trading carbon credits.
- Focus: Emission intensity-based regulation of greenhouse gas (GHG) emissions.
- Replaces PAT by shifting from energy-saving certificates to Carbon Credit Certificates (CCC), where each CCC = 1 tonne of CO₂ equivalent (tCO₂e) reduced.
Key Mechanisms of CCTS
- Compliance Mechanism
- Applicable to energy-intensive sectors like iron & steel, aluminium, cement, fertilizers, refineries, pulp & paper, textiles.
- Entities must meet sector-specific GHG intensity targets.
- Entities exceeding targets earn CCCs; underperformers must buy credits.
- Offset Mechanism
- Allows voluntary participation from non-obligated sectors (e.g., agriculture, afforestation).
- Enables generation and trade of carbon credits.
Why is CCTS Important?
- Helps India meet its Nationally Determined Contributions (NDCs) — aim to reduce emission intensity by 45% by 2030.
- Encourages clean technology adoption, carbon capture, and private sector participation.
What is Carbon Pricing?
- An economic tool that assigns a cost to carbon emissions to shift financial burden to polluters.
- Provides a market signal to reduce emissions or invest in green technologies.
Carbon Pricing Mechanisms:
- Emissions Trading System (ETS)
- Cap-and-Trade: Emissions capped; firms trade allowances.
- Baseline-and-Credit: Firms emitting less than baseline can sell credits.
- Carbon Tax
- Fixed price per tonne of CO₂ emitted.
- Crediting Mechanism
- Project-based emissions reductions generate tradable carbon credits.
Challenges in Effective Implementation of CCTS
- Target Setting: Must balance ambition with industry capacity; wrong targets may distort CCC value.
- Compliance Weakness: Under PAT, over 50% of certificates went untraded; no penalties enforced.
- Delayed Credit Issuance: Undermines market confidence.
- Transparency & MRV (Monitoring, Reporting, Verification): Gaps in emissions data affect credibility.
- Risk of Double Counting: Especially in international trade contexts.
Governance Mechanisms
- Mission LiFE (Lifestyle for Environment)
- Global mission to promote sustainable living.
- Goal: Mobilize 1 billion people by 2028 for pro-planet actions.
- Green Credit Program (GCP)
- Voluntary market to incentivize tree plantations on degraded forest lands.
- Credits awarded based on verified reforestation efforts.
- National Steering Committee for Indian Carbon Market (NSCICM)
- Apex body guiding rules, targets, and governance of carbon markets.
- Bureau of Energy Efficiency (BEE)
- Established in 2002, key body implementing carbon market and energy efficiency norms.
TH & PIB
UPSC Civil Services Examination, Previous Year Question (PYQ)
Prelims
Q. Consider the following statements (2023)
Statement—I: Carbon markets are likely to be one of the most widespread tools in the fight against climate change.
Statement—II: Carbon markets transfer resources from the private sector to the State.
Which one of the following is correct in respect of the above statements?
(a) Both Statement—I and Statement—II are correct and Statement—II is the correct explanation for Statement—I
(b) Both Statement—I and Statement—II are correct and Statement—II is not the correct explanation for Statement—I
(c) Statement—I is correct but Statement—II is incorrect
(d) Statement—I is incorrect but Statement—II is correct
Ans: B
