Environment and Ecology > Global warming > Climate change
Why in news?
- Parliament passed the Energy Conservation (Amendment) Bill, 2022.
- The Bill amends the Energy Conservation Act, 2001 to empower the Government to establish carbon markets in India and specify a carbon credit trading scheme.
About Carbon Market:
- Carbon Markets and Carbon Credits are components of emissions trading, a market-based approach to to reduce the concentration of Greenhouse gases (GHG) in the atmosphere.
- It works by providing economic incentives for reducing the emissions of the designated pollutants.
- A carbon market allows investors and corporations to trade both carbon credits and carbon offsets simultaneously.
- Carbon credits (or allowances) work like permission slips for emissions. When a company buys a carbon credit, they gain permission to generate more CO2 emissions.
- One tradable carbon credit equals one tonne of carbon dioxide or the equivalent amount of a different greenhouse gas reduced, sequestered or avoided.
- Credits are measured against ‘benchmarks’ or allowed GHG emissions.
- If emissions are below the allowed limit, the emitter earns carbon credits (reducing 1 tonne of CO2 earns 1 carbon credit).
- If emissions are above the allowed limit, the emitter must buy carbon credits from those who have excess credits.
- Thus, crossing the emissions limit imposes a cost (amount spent on purchase of carbon credits) on the emitter.
- The cost will force the emitters to be more efficient and reduce emission.
Types of carbon markets:
- Voluntary markets:
- It is a decentralized market in which emitters— corporations, private individuals, and others— voluntarily buy and sell carbon credits that represent certified removals or reductions of greenhouse gases (GHGs) in the atmosphere.
- For instance, in the aviation sector, airlines may purchase carbon credits to offset the carbon footprints of the flights they operate.
- Compliance Carbon Market:
- It is used by companies and governments that by law have to account for their GHG emissions. It is regulated by mandatory national, regional or international carbon reduction regimes.
- Today, compliance markets mostly operate under a principle called ‘cap-and-trade”, most popular in the European Union (EU).
Paris Agreement and carbon market:
- Article 6 of the Paris Agreement provides for the use of international carbon markets by countries to fulfil their NDCs.
- But this article is yet to kick off as multilateral discussions are still underway about how the inter-country carbon market will function.
- Under the proposed market, countries would be able to offset their emissions by buying credits generated by greenhouse gas-reducing projects in other countries.
Energy Conservation (Amendment) Bill, 2022 on carbon market:
- The Bill empowers the Centre to specify a carbon credits trading scheme.
- Under the Bill, the central government or an authorized agency will issue carbon credit certificates to companies or even individuals registered and compliant with the scheme.
- These carbon credit certificates will be tradeable in nature. Other persons would be able to buy carbon credit certificates on a voluntary basis.
With reference to ‘Energy Conservation (Amendment) Bill, 2022’, consider the following statements:
1. It empowers the State Governments to specify a carbon credits trading scheme
2. Carbon credit certificates under this bill will be tradeable in nature
Which of the statements given above is/are correct?
(a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) Neither 1 nor 2