Energy Conservation Act Paves Way for Carbon Credit Market in India

The Act promotes renewable energy consumption by residential buildings


Rajya Sabha approved the Energy Conservation (Amendment) Bill, 2022, clearing the way for setting up a Carbon Credit Trading market in India.

The Bill, which seeks to amend the Energy Conservation Act of 2001, was passed in the Lok Sabha in August this year.

The amended legislation introduces provisions for a legal framework to administer carbon credit trading.

It also mandates the minimum share of renewable energy consumption for industrial units or any establishment.

The amendments also incentivize the use of clean energy sources through Carbon Saving Certificates.

Additionally, the Act will enforce the purchase of energy savings certificate for consumers whose energy consumption exceed the prescribed norms and standards.

The Act also brings in energy consumption standards for vehicles and vessels.

Responding to the questions in Rajya Sabha, Union Minister of Power, R K Singh, said that Central Electricity Regulatory Commission (CERC) will be the designated regulator of the carbon credits market, which will operate on a mechanism similar to power exchanges.

Further, the Ministry of Environment and Forest is the designated governing body for implementing the Act.

The minister added that the carbon credits would not be available for sale outside the country until the nation’s NDC (Nationally Determined Contributions) targets are met.

The Act mandates that residential buildings with a connected load of 100 kW and above would meet a portion of their energy requirements from renewable sources. Previously the mandate was applicable only to commercial buildings.

The minister, in his response, highlighted this as a major step towards achieving net zero, as energy consumption in the housing sector accounted for 24% of the nation’s total.

He further added that the individual states would have the flexibility to include building with under 100 kW load in the coming years.

In cases where they fail to fulfill these obligations, the states can penalize them under the building bylaws.

Other significant provisions of the bill include the scaling up of green hydrogen, green ammonia, biomass, and ethanol production for energy and as feedstock for major industries in the country.

The Ministry of Power, earlier this year, had also introduced the Green Hydrogen Policy’ on the lines of promoting the production of green hydrogen in the country.


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