29/08/2022 - Environment

KEY POINTS

·        The Lok Sabha recently passed a Bill to set up a nationwide carbon trading market. Carbon trading is an important way to reduce the cost of cutting emissions.

·        Common carbon currency: India already has two energy trading mechanisms Perform Achieve Trade (PAT) for energy efficiency and Renewable Energy Certificates (REC) for renewable energy.

·        A common carbon currency will also improve the liquidity of the market making it more dynamic and responsive to demand and supply.

·        Diversity of sectors: The cost of reducing carbon varies significantly across sectors.

·        For instance, under the UK’s Climate Change Agreements Scheme, the regulator inks umbrella emissions reduction deals with sectoral industry associations that then meet the target collectively.

·        Policies for innovation and competitiveness: A carbon market that incentivises deep decarbonisation beyond the low-hanging fruit will require complementary policies that spur innovation in new green technologies.

·        Long-term price signal: Creating stable and long-term demand in the carbon market is important to maintain a sustained price signal to spur investment.

·        Stakeholder capacity building: In our simulation, companies with prior experience in GHG estimation and management made more effective trading decisions.

·        A carbon market can be an effective economic policy in India’s toolkit to support the uptake of these new energy sources and technologies.

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