U.K. Recognises India's Carbon Credit Trading Scheme
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Key takeaways
- The United Kingdom officially recognized India's Carbon Credit Trading Scheme (CCTS) under its Carbon Border Adjustment Mechanism (CBAM) to protect Indian exporters from double carbon taxation.
- Formed under the Energy Conservation Act, 2001 (amended in 2022), CCTS updates the legacy PAT scheme by placing targets directly on Greenhouse Gas Emission Intensity (GEI).
- The scheme initially mandates compliance across 9 major carbon-intensive sectors, including steel, cement, and refineries, while excluding thermal power plants for now.
- Central administrators for the carbon market include the Bureau of Energy Efficiency (BEE) alongside regulatory support from CERC.
Why in News
- The United Kingdom has officially recognised India's Carbon Credit Trading Scheme (CCTS) as a qualifying carbon pricing mechanism under its Carbon Border Adjustment Mechanism (CBAM). This decision provides carbon price relief to Indian exporters.
- This recognition followed technical discussions between India and the U.K. Both countries will continue working together through bilateral frameworks like the U.K.-India Energy Memorandum of Understanding and the Partnership for Market Implementation.
Significance of U.K.'s Recognition
- U.K. businesses importing eligible Indian products under CBAM can claim tax relief based on the carbon price already paid in India under CCTS. This step reduces the extra carbon tax liability on Indian goods.
- The decision prevents double taxation on carbon emissions. Products that have already paid an eligible carbon price in their home country receive a fair adjustment at foreign borders.
- This recognition strengthens India's role in global carbon trading markets. It boosts export competitiveness and gives carbon-intensive industries long-term policy certainty.
- The actual relief will depend on the exact carbon price paid by the exporter in India. Exporters must also satisfy strict evidence and verification rules set under U.K. CBAM laws.
Key Facts About Carbon Credit Trading Scheme
- India launched CCTS under the Energy Conservation Act, 2001 (amended in 2022). It is a market-based system under the Indian Carbon Market (ICM) that reduces greenhouse gas emissions through trading Carbon Credit Certificates (CCCs).
- Earlier, India used the Perform, Achieve and Trade (PAT) scheme with Energy Saving Certificates (ESCerts) for energy efficiency. CCTS shifts focus toward directly lowering overall Greenhouse Gas Emission Intensity (GEI) across specific sectors.
- The compliance mechanism mandates energy-heavy industries to meet set GEI targets. Companies exceeding their targets earn CCCs, while companies missing targets must buy credits to stay compliant.
- The offset mechanism allows non-obligated companies to participate voluntarily. These entities can register clean projects and earn CCCs for verified emission reductions.
- Initially, CCTS covers 9 major energy-intensive sectors, including aluminium, cement, chlor-alkali, pulp and paper, iron and steel, fertilizer, petroleum refineries, petrochemicals, and textiles.
- Although the thermal power sector generates a large portion of national greenhouse gas emissions, thermal power plants are not yet included in the mandatory CCTS compliance mechanism.
- The framework relies on multiple authorities for administration. The Bureau of Energy Efficiency (BEE) acts as the administrator, Grid Controller of India Limited operates the registry, and CERC provides regulatory support.
- Overall, CCTS helps India achieve its climate targets by encouraging investments in low-carbon technologies, energy efficiency, clean energy adoption, and overall emission reduction.