Source: ET
Context The United Kingdom has recognised India’s Carbon Credit Trading Scheme (CCTS) as a qualifying criterion for pricing relief under its Carbon Border Adjustment Mechanism (CBAM) — a move expected to reduce the tax burden on Indian exporters.
What CBAM Is
- A carbon border tax levied on imports of carbon-intensive goods
- Its purpose is to prevent carbon leakage — production shifting to countries with weaker climate rules to avoid domestic carbon costs
- The importer pays a charge reflecting the carbon embedded in the goods, equalising treatment with domestically produced goods that already bear a carbon price
- Typically covers iron and steel, aluminium, cement, fertilisers, hydrogen and electricity
Why Recognition Reduces the Liability
- CBAM is designed to charge for carbon that has not already been priced in the country of origin
- If an exporter has already paid a carbon price at home, that amount is deducted from the border charge
- Recognition of the CCTS means carbon costs paid under India’s own scheme now count as a credit against UK CBAM liability
- Without recognition, Indian exporters would have paid twice — once under CCTS domestically and again at the UK border
About India’s Carbon Credit Trading Scheme
- Notified in 2023 under the Energy Conservation (Amendment) Act, 2022
- Administered by the Bureau of Energy Efficiency (BEE) under the Ministry of Power
- Has two mechanisms:
- Compliance mechanism — obligated entities in energy-intensive sectors must meet emission-intensity targets
- Offset mechanism — non-obligated entities can register projects and earn tradeable credits
- Succeeds the earlier PAT (Perform, Achieve and Trade) scheme
- Credits are traded on power exchanges, with the Grid Controller of India as registry and CERC as regulator
