GS Paper - 3 (Environment)

Lok Sabha on 8 August 2022 passed the amendments to the Energy Conservation Act aimed at putting in place provisions to make the use of clean energy mandatory and paves way for setting of carbon markets in the country. The Energy Conservation (Amendment) Bill, 2022, seeks to mandate use of non-fossil sources, including biomass and ethanol for energy and feedstock along with the use of green hydrogen and green ammonia.

More about the bill

  1. It also proposes to enhance the scope of Energy Conservation Building Code and bring large residential buildings within the ambit of energy conservation regime.
  2. The Energy Conservation Act, 2001 was last amended in the year 2010 to address various new factors which emerged with the development of the energy market over a period of time and to provide for more efficient and effective use of energy and its conservation.
  3. The context of energy transition with special focus on promotion of new and renewable energy and National Green Hydrogen Mission, a need has arisen to further amend the said Act to facilitate climate targets committed at COP26 summit, promote renewable energy and development of domestic carbon market to battle climate change.
  4. It mandates use of non-fossil sources to ensure faster decarbonization of the Indian economy and help in achieving sustainable development goals in line with the Paris Agreement.
  5. The bill would also empower state governments to make rules regarding fees to be levied for the services rendered by the designated agency for promoting efficient use of energy and its conservation along with the preparation of the budget of the designated agency.

What are carbon markets?

  1. The creation of a domestic carbon market is one of the most significant provisions of the proposed amendment Bill. Carbon markets allow the trade of carbon credits with the overall objective of bringing down emissions.
  2. These markets create incentives to reduce emissions or improve energy efficiency. For example, an industrial unit which outperforms the emission standards stands to gain credits. Another unit which is struggling to attain the prescribed standards can buy these credits and show compliance to these standards. The unit that did better on the standards earns money by selling credits, while the buying unit is able to fulfill its operating obligations.
  3. Under the Kyoto Protocol, the predecessor to the Paris Agreement, carbon markets have worked at the international level as well. The Kyoto Protocol had prescribed emission reduction targets for a group of developed countries.
  4. Globally, 68 carbon pricing instruments (CPIs), covering 23% of the GHG emission, are operational.
  5. The roll-out in India is expected to happen in three phases, leveraging the existing infrastructure and building on the learning from the Perform Achieve and Trade (PAT) scheme and the global experience in this sphere.