Lok Sabha approves Energy Conservation Bill to accelerate climate action; opens multi-billion dollar carbon market

The Energy Conservation (Amendment) Bill, 2022, which aims to tap the multi-billion dollar global carbon market, was approved by the Lok Sabha on Monday. The amendment focuses on speeding up the green transition by granting the government the authority to control energy consumption, mandate the use of non-fossil fuels by industries, and establish efficiency standards for vehicles, ships, and equipment as part of India's climate change mitigation strategy.
The bill amends the Energy Conservation Act of 2001. It gives the Centre the authority to specify a trading scheme for carbon credits, effectively paving the way for a fresh carbon market in the country. Carbon credits are tradable permits to emit a specific amount of carbon emissions. In simple terms, an industrial unit that emits much less carbon than its target values is eligible to receive carbon credits, and an industry that fails to meet the target can then purchase such credits and demonstrate compliance.
Carbon markets, if managed efficiently, can redirect finances from emitter to carbon-neutral units and provide a financial incentive for companies to aim for net-zero emissions. Power minister R K Singh, therefore, called it "the bill for the future".
According to the proposed legislation, the Centre may order "designated consumers" to meet a minimum percentage of their energy needs from non-fossil sources. To entities registered under and compliant with the scheme, the Center or any authorised agency may issue carbon credit certificates for use in carbon trading.
The legislature may help tap the $800-billion global carbon market and facilitate more foreign direct investment (FDI) in green technologies. However, the bill primarily aims to fast-track India’s clean energy transition and the power minister categorically declared that India would not permit the export of credits until it fulfilled the promises made at COP21 and COP26.
This comes on the heels of the cabinet approving India’s updated Nationally Determined Contribution (NDC) to be communicated to the United Nations Framework Convention on Climate Change (UNFCCC). The updated NDC of India promises to reduce the Emissions Intensity of its GDP by 45% by 2030 from the 2005 levels and achieve about 50% cumulative electric power installed capacity from non-fossil fuel-based energy resources by 2030.
In addition to establishing carbon markets, the bill mandates the use of non-fossil fuels such as green hydrogen, green ammonia, biomass, and ethanol for energy and feedstock for many industrial applications. The bill also expands the scope of the Energy Conservation Building Code, amends penalty clauses, and gives the State Electricity Regulatory Commissions more authority.
In order to mitigate the cascading impacts of climate change, governments all over the world are increasing their commitments to climate action. Article 6 of the Paris Agreement — a binding global agreement on climate change — also provides a robust basis for the use of international carbon markets to reduce global greenhouse gas emissions while ensuring transparency and accountability. Experts also highlight the need to develop end-to-end, state-of-the-art digital infrastructure to support fair and transparent market transactions