Bureau of Energy Efficiency Proposes Procedure for Carbon Credits Trading

The carbon credits certificate will be traded on the Indian Carbon Market

November 15, 2023


The Bureau of Energy Efficiency (BEE) has issued the draft Detailed Procedure for Compliance Mechanism under the Carbon Credit Trading Program.

Compliance mechanism

Under the new procedure, the Ministry of Environment, Forest and Climate Change will announce the greenhouse gas (GHG) emission intensity targets for tons of carbon dioxide equivalent (tCO2e) per unit of equivalent product for each defined trajectory cycle applicable to obligated entities.

These obligated entities will be informed of an annual target for three years, and upon the conclusion of this period, the targets will undergo revision.

Entities must adhere to the GHG emission intensity targets assigned annually within the compliance cycle.

The obligated entity that exceeds the targeted GHG emission intensity in any compliance cycle is entitled to the issuance of carbon credit certificates based on the difference in the achieved and targeted GHG emission intensity for the production quantity in the relevant compliance cycle.

Entities failing to achieve the targeted GHG emission intensity in any compliance cycle are entitled to purchase the carbon credit certificates based on the difference in the achieved and targeted GHG emission intensity for the production in the relevant compliance cycle.

Establishment of GHG Emission Targets

To establish GHG emission intensity targets, the technical committee established by the Bureau will compute the GHG emission intensity for the baseline year and set targets for each compliance cycle.

GHG emission intensity reduction trajectory will be developed for the considered sectors based on India’s nationally determined contribution commitments and potential for fuel switch, use of non-fossil fuel energy/feedstock, and decarbonization in the sector. It will also consider available technology and the associated cost of their implementation.

This calculation will encompass direct energy, process (non-energy), and indirect energy-related emissions from the obligated entity’s establishment boundary, considering the products manufactured during the year on a gate-to-gate basis or reception of the raw materials to the completion of the production process.

Here’s a breakdown of the components involved:

Direct GHG Emissions:

  • These are emissions from sources owned or controlled by the obligated entity.
  • It includes emissions from the combustion of any fossil fuel burned in stationary equipment like boilers, gas turbines, kilns, or furnaces to generate heat, mechanical work, and steam.

Direct Process Emissions:

  • Refers to emissions from industrial processes that are not related to combustion.
  • These emissions result from chemical reactions between substances or their transformations.

Indirect GHG Emissions:

  • These GHG emissions occur as a consequence of the obligated entity’s activities but occur at sources outside the obligated entity’s establishment.
  • This category includes indirect emissions from electricity purchased from the grid and emissions from electricity and heat imported from outside the plant boundary.

Calculation of GHG emissions

All potential emission sources and corresponding source streams within the establishment are initially meticulously identified. These sources comprehensively cover energy and process (non-energy) related GHG emissions.

A comprehensive examination of various forms of GHG emission sources from energy use is conducted, encompassing solid fuel, liquid fuel, gaseous fuel, purchased electricity, purchased heat, or any other energy form imported for production.

Additionally, the consideration extends to process-related GHG emissions arising from chemical reactions between substances or transformations, wherever applicable. The total GHG emissions are then estimated by aggregating emissions from diverse sources and converting them into a standardized GHG emissions unit, specifically measured in tCO2e.

This method ensures a comprehensive assessment of the environmental impact of the obligated entity’s establishment.

GHG emissions from biomass, renewables, refrigerant leakages, or if GHG emissions are captured or utilized by the plant through carbon capture, storage, and utilization technology.

Verification process

In consultation with the Accredited Carbon Verification Agency, the obligated entity must implement transparent, independent, and credible monitoring and reporting arrangements for GHG emissions and production for compliance with GHG emissions intensity targets.

The obligated entity must monitor greenhouse gas emissions based on the monitoring plan. It must submit the plant to the Bureau within three months from the commencement of a compliance cycle, taking into account the nature and functioning of the entity.

Entities should monitor the activity data of a source stream in one of the following direct ways– (a) based on continual measurement at the emission source (b) based on quantities aggregated at regular intervals – daily/ weekly/ monthly, considering relevant stock changes.

Entities must ensure that coal samples are picked up from the auto-sampler at least once a month or at every 20,000 tons and for raw material at least once a month or every 50,000 tons and get such samples tested at their internal lab and external National Accreditation Board for Testing and Calibration Laboratories accredited lab for material, energy analysis and ultimate analysis of coal.

Every obligated entity, within three months of the conclusion of the compliance cycle, must submit the performance assessment document covering the performance for the relevant cycle specifying the compliance with GHG emission intensity targets, duly verified together with a certificate of verification given by the accredited carbon verification agency.

The Bureau can initiate action for independent review of compliance report on receipt of a complaint.

The Bureau must submit the report to the National Steering Committee for Indian Carbon Market (NSCICM), based on the claim raised by the obligated entity, within two months from the last date of report submission for issuance of carbon credit certificates.

The NSCICM will recommend that the Bureau issue carbon credit certificates within two weeks of receiving the report.

Trading of Carbon Credit Certificates

Following the issuance of carbon credit certificates, obligated entities must complete registration on the Indian Carbon Market (ICM) Registry within four weeks from the certificate’s issuance. Additionally, non-obligated entities wishing to purchase carbon credit certificates voluntarily must also undergo registration on the ICM Registry. Upon successful registration with the ICM Registry, a certificate of registration will be issued to the respective obligated and non-obligated entities.

Subsequently, obligated and non-obligated entities can register and trade carbon credit certificates on Power Exchanges endorsed by the Commission specifically for carbon credit certificates trade under the ICM.

Banking of Carbon Credit Certificates

On completion of the compliance cycle, the balance carbon credit certificates of that compliance cycle can be banked to utilize in the next compliance cycles.

On completion of the compliance cycle, the balance carbon credit certificates of that compliance cycle can be banked to utilize in the next compliance cycles.

The banked carbon credit certificates purchased from the Indian Carbon Market can be used only to achieve compliance in the compliance cycles.

Compliance with GHG Emission Norms

The obligated entity should submit the long-term action plan within three months from the commencement of the first compliance cycle and the planned annual activities for the current compliance cycle.

The obligated entity must submit the annual planned activities for the subsequent compliance cycles within three months from the commencement of the relevant compliance cycle and a revised long-term action plan in case of any revision.

The obligated entity should comply and furnish the compliance status after the verification and trading process within nine months from the completion of the compliance cycle.

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

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