- CSE has released its proposed roadmap as part of its new report titled The Indian Carbon Market: Pathways towards an Effective Mechanism.
- In assessing the PAT scheme, CSE examined emissions reductions in the power, steel, and cement sectors.
CSE (Centre for Science and Environment) has released its proposed roadmap as part of its new report, The Indian Carbon Market: Pathways towards an Effective Mechanism. India has pledged to meet its Nationally Determined Contribution targets by 2030.
This report collates lessons from compliance-based emission trading schemes worldwide, including those in India, to facilitate the effective operationalisation of carbon markets in India. The goal is to ensure these markets serve their intended purpose of reducing emissions.
India has pledged to meet its Nationally Determined Contribution (NDC) targets by 2030. It aims for net-zero emissions by 2070, in line with the United Nations Framework Convention on Climate Change (UNFCCC) guidelines. The country is developing and launching its own national compliance-based carbon market to achieve these ambitious goals.
The CSE report analyses four Emission Trading Schemes (ETS) currently in use worldwide: the European Union Emission Trading System, the Korean ETS, the Chinese ETS, and the Surat ETS. It also assesses India‘s Perform, Achieve, and Trade (PAT) scheme, which has set the base for the upcoming Indian Carbon Market scheme by specifying energy reduction targets over three-year cycles.
In assessing the PAT scheme, CSE examined emissions reductions in the power, steel, and cement sectors. The findings highlight the challenges in the PAT scheme, including the excess availability of Energy Saving Certificates (ESCerts), lenient targets, and delayed compliance. The newly proposed Carbon Credit and Trading Scheme (CCTS), which aims to build on the PAT framework, must address these shortcomings.
Several challenges could affect the proposed new scheme. One significant issue is the low price of carbon credits and low market liquidity. Many global carbon markets, including India’s PAT scheme, initially faced challenges such as low pricing and excess certificate availability.
Additionally, the PAT scheme has faced criticism for setting unambitious targets, leading to the overachievement of goals and an oversupply of ESCerts, which has resulted in poor market prices. Kumar emphasises that CCTS must avoid these past mistakes by setting ambitious targets for individual entities and sectors, considering best practices and going beyond existing policies to ensure the market drives genuine progress rather than mere compliance.
Another challenge is the dependence on the PAT scheme, which may limit the potential of CCTS and its selection of obligated entities, making the scheme less effective and potentially delaying decarbonisation efforts.