The Ministry of Power (MoP), in consultation with the Bureau of Energy Efficiency, has launched the Carbon Trading Program 2023, outlining the processes, regulating agencies, and rules for carbon credit trading in India.

To oversee the functioning of the Indian carbon market, the Central Government will establish the “National Steering Committee for Indian Carbon Market,” which will assume governance and direct responsibilities.

The committee’s primary focus will be to recommend procedures for institutionalizing the Indian carbon market, including rules and regulations, emission targets for obligated entities, guidelines for trading carbon credit certificates outside India and issuing carbon credit certificates.

Additionally, it will propose the development of processes or conditions for crediting periods, renewals, and expiration of carbon credit certificates.

Earlier in May, the Union government announced its plans to develop the Indian carbon market with a national framework to decarbonize the country’s economy by trading carbon credit certificates.

Under the program, the National Steering Committee will monitor the market’s operations and propose the creation of necessary committees or working groups, as listed below –

Administrator –

As the administrator of the Indian carbon market, the Bureau of Energy Efficiency will identify sectors with the potential for reducing greenhouse gas emissions and suggest their inclusion in the market to the Ministry.

The Bureau will also establish a trajectory and targets for entities under the compliance mechanism and issue carbon credit certificates based on the National Steering Committee’s recommendations and subsequent approval by the Central Government.

Furthermore, the Bureau will develop market stability mechanisms, accreditation procedures, and the functions of accredited carbon verification agencies. It will determine fees for registered entities, ensuring the program’s implementation costs are met.

The Bureau will also develop processes for the crediting period, renewal, and expiration of carbon credit certificates, as well as data submission formats and forms for the effective functioning of the Indian carbon market.

Capacity-building activities for stakeholders and developing and maintaining the necessary information technology infrastructure, including a user guidance platform, fall within its purview.

Additionally, the Bureau will maintain a secure database with approved security protocols mandated by the government.

Registry

The Grid Controller of India, as the carbon market registry, will be responsible for fulfilling various functions per the Bureau’s directions.

These functions include registering obligated or non-obligated entities, maintaining a secure database with the necessary security protocols, keeping records of all transactions, sharing transaction records with the Power Exchange and Bureau, assisting in developing an information technology platform for the carbon credit certificate database, functioning as a meta-registry for India, and establishing connections with other approved national or international registries.

Regulator

As for the trading activities within the Indian Carbon Market, the Central Electricity Regulatory Commission (CERC) will act as the regulator. This regulatory body will oversee matters related to the trading of carbon credit certificates, ensuring the interests of both sellers and buyers are protected.

It will regulate the frequency of carbon credit certificate trading and provide market oversight, taking necessary preventive and corrective actions to prevent fraud or mistrust.

The CERC’s role is to maintain a fair and trustworthy trading environment within the Indian Carbon Market.

Technical Committees

The Bureau will establish specialized technical committees, as necessary, to address different areas under the compliance mechanism of the program. Each committee will be headed by an expert member possessing the required eligibility and expertise in the respective sector.

These technical committees will undertake specific functions related to the program and provide recommendations to the Bureau on the matters assigned to them.

Carbon Credit Verification and Trading

The Bureau, with prior approval from the Central Government, will establish the procedure and eligibility criteria for the accreditation of agencies functioning as carbon verification agencies.

This process will be based on the recommendations of the National Steering Committee.

In terms of trading carbon credit certificates, the Commission will oversee the registration of power exchanges and approve the trading of carbon credit certificates within the Indian carbon market.

Power exchanges must seek the Commission’s approval for their respective bylaws and certificate trading rules. The power exchanges will be responsible for the functions related to the trading of carbon credit certificates.

Compliance

The Ministry of Power, in consultation with the Bureau, will determine the sectors and obligated entities that will fall under the compliance mechanism of the program. This decision will be made based on the recommendations provided by the Bureau.

The National Steering Committee for the Indian carbon market and other authorities shall develop a detailed procedure for operationalizing the Indian carbon market.

The Bureau, with the approval of the Central Government, has the authority to issue directions and orders to the registered entities as deemed necessary for the successful implementation of the program.

The government is planning to seek validation of its proposed carbon certificates from the European Union, which will enforce a carbon tariff on imports and the exemption for some micro, medium, and small enterprises.