The Central Electricity Regulatory Commission (CERC) has released a draft notification outlining new regulations for purchasing and selling Carbon Credit Certificates (CCCs).

These proposed regulations, titled “Central Electricity Regulatory Commission (Terms and Conditions for Purchase and Sale of Carbon Credit Certificates) Regulations, 2024,” aim to establish a framework for trading CCCs on power exchanges accessible to both obligated and non-obligated entities.

The draft regulations are expected to play a crucial role in India’s efforts to reduce greenhouse gas emissions and meet its climate commitments

Stakeholders can provide feedback on the regulations.

These regulations will apply to CCCs available for trading on power exchanges, including CCC contracts approved by the CERC that are in line with power market regulations.

The Grid Controller of India will serve as the registry for the exchange of CCCs and will set up the required framework to facilitate this exchange.

Functions of the Administrator

The Bureau of Energy Efficiency (BEE) will administer CCCs issued under the Energy Conservation (EC) Act.

Within the scope of these regulations, the BEE’s responsibilities will include:

• Developing a detailed procedure for implementing the Carbon Credit Trading Program in collaboration with the registry, following public consultation and approval from the CERC.
• Assisting the CERC in CCC transactions on power exchanges.
• Ensuring transparent exchange of CCCs and reporting any instances of non-compliance to the CERC.
• Providing relevant information about obligated and non-obligated entities to the registry.
• Ensuring compliance with the EC Act and Environmental Protection (EP) Act.
• Informing the registry about the expiration of CCCs in the accounts of obligated entities.
• Coordinating with power exchanges and the registry for a smooth operational interface for CCC exchange.

Additionally, the BEE will oversee interface operations between power exchanges, the registry, the administrator, and obligated and non-obligated entities.

The BEE will also disseminate relevant market information to all stakeholders.

The value of CCCs will be determined based on the guidelines specified in the Carbon Credit Trading Program, 2023.

Two detailed procedures will outline the validity of CCCs: one for the Compliance Mechanism for certificates issued under that system and another for the Offset Mechanism.

Both procedures were developed under Section 12 of the Carbon Credit Trading Program.

The BEE will categorize CCCs to distinguish between obligated and non-obligated entities. Additionally, upon receiving an application, the CERC may permit power exchanges to introduce specific categories of CCCs, provided these align with the established power market regulations.

Trading of CCCs

CCCs must be traded only through power exchanges unless the CERC permits otherwise. There will be two market segments: the compliance market for obligated entities and the offset market for non-obligated entities.

Trading will occur monthly or as approved by the CERC.

Power exchanges must get CERC’s approval for their rules, including eligibility, price discovery, and interactions with the registry.

Entities wishing to trade CCCs must register with the power exchange. CCC holders can choose any power exchange to trade.

Entities cannot place sale bids exceeding their CCC holdings. The registry will cross-check bids against available CCCs and notify power exchanges if an entity exceeds its holdings, marking it as a defaulter.

Entities with more than three defaults in a quarter will be suspended from trading for six months. The Registry will publish a list of defaulters monthly.

Power exchanges must report transaction details to entities and the Registry. After a trade, the Registry will update the accounts of both the seller and the buyer.

CCCs issued by the BEE and approved by the government can be traded on any power exchange following the applicable rules.

The procedures for banking and extinguishment of CCCs will follow the guidelines specified in the detailed procedure for compliance mechanism and offset mechanism under the Carbon Credit Trading Program.

Pricing of Certificates 

Each CCC will be denominated, representing a reduction, removal, or avoidance of greenhouse gas emissions equivalent to one ton of carbon dioxide (tCO2e).

The market price of CCCs will be determined by bidding on the respective power exchanges.

CCCs will be traded within a floor price and forbearance price range, as approved by the CERC upon a proposal from the BEE.

The CERC may, at its discretion, issue directives to power exchanges or the registry if specific circumstances arise, such as abnormal price changes, sudden price volatility, or unusually high or low trading volumes of CCCs on a power exchange.

The CERC, in consultation with the BEE, may periodically set fees and charges for obligated and non-obligated entities payable to the Registry to cover the costs of managing the Registry and its software platform.

Market Oversight 

The CERC, with assistance from the BEE, will exercise market oversight over CCCs traded on power exchanges, in line with the Power Market Regulations.

In July, the Ministry of Power, in consultation with the BEE, launched the Carbon Trading Program 2023, outlining the processes, regulating agencies, and rules for carbon credit trading in India.

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