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Opinion: Energy Conservation Bill and What It Will Do for India’s Carbon Markets

India's economy's carbon intensity will be reduced by less than 45% by 2030, according to PM Modi.

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Climate Change
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On Monday, the Rajya Sabha passed the Energy Conservation (Amendment) Act, 2022 by voice vote. The Act was approved by Lok Sabha during its previous session in August of this year. R K Singh, the Minister of New and Renewable Energy, stated in response to a discussion on the act that it is environment friendly and will enable carbon trading in the nation.

India has now emerged as a leader in the energy transition, he said, adding that the government "would take all means" to protect the environment.

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According to him, the housing sector currently consumes 24% of all energy, and the government has only targeted major corporations with a load capacity of 100KW.

However, he said that the state government was free to cut the construction load by up to 50KW. "We are also extending the idea of green building. We are improving its sustainability. Energy efficiency was present earlier, and we are now including the idea of renewable energy in this," he said.

The Act amends the Energy Conservation Act, 2001, the amendment act calls for increasing the use of non-fossil fuel energy, such as green hydrogen and green ammonia, in order to decrease the nation's reliance on fuel imports.

The primary law, the Energy Conservation Act, which was passed by the Indian Parliament in 2001 and cleared the path for energy conservation with an emphasis on energy-efficient appliances and technologies, will be replaced by the new laws.

The act also resulted in the establishment of the Bureau of Energy Efficiency (BEE), the central government organisation in charge of handling matters related to energy conservation, including the formulation of rules, standards, and specifications.

Key Amendments

Establishment of Carbon Trading Market:

There aren't any official or formal carbon markets in India right now. The Act represents the first step towards incorporating the idea of carbon trading into Indian law, but the specifics of this are left up to the Central Government's discretion.

Having stated that, the Perform Achieve and Trade (PAT) Mechanism and the Renewable Energy Certificate (REC) scheme are two market-based strategies that are now being used in India to enhance energy efficiency and renewable energy.

A registered entity that complies with the rules of the carbon credit trading scheme will receive carbon credit certificates from the Government of India or any GoI mandated agency.

The proposed carbon market would be helpful in three ways: it might expand and deepen the market for energy efficiency, cut emissions from different businesses, and encourage the use of cleaner fuels.

The Draft Blueprint for National Carbon Markets, published by BEE in October 2021, proposed the development of a Voluntary Carbon Market (VCM) in three phases, even though the amendment makes no mention of the regulatory structure of the carbon market or its connections with currently running programmes.

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Use of Non-Fossil Energy Sources is Required:

Amendment to Section 14 empowers the Central government to specify energy consumption standards. The Act also states that the government may mandate that certain consumers fulfil a minimum percentage of their energy needs from non-fossil sources.

For various non-fossil sources and consumer categories, different consumption levels may be established.

Industries like mining, steel, cement, textile, chemicals, and petrochemicals are designated users, as are the transportation sector, including railroads, and commercial structures, as listed in the schedule. Failure to comply with this responsibility could result in fines of up to Rs 10 lakh.

Additionally, it will result in a fine of up to twice the price of the oil equivalent for any extra energy used.

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Provisions for ‘Energy Conservation and Sustainable Building Code’:

Norms for energy efficiency and conservation, the use of renewable energy, and other specifications for green buildings will be provided under the new code.

Additionally, office and residential structures that meet the aforementioned requirements will also be subject to the new Energy Conservation and Sustainable Building Code.

The Act gives state governments the authority to lower load thresholds.

On a concluding note. the amendments go a long way toward making it easier for India to reach its updated Nationally Determined Contributions. However, more details regarding the precise market structure and incentives are required.

The way in which all significant stakeholders—including consumers—are engaged depends on how well the provisions will be able to synchronise with the goals of the revised Energy Conservation Act.

(Nancy Saroha and Akshat Mehta are LL.M Candidates at Hidayatullah National Law University (HNLU), Raipur)

(This is an opinion piece and the views expressed above are the author’s own. The Quint neither endorses nor is responsible for the same.)

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