Carbon Credit Trading Scheme, 2023

[28th June 2023]

In exercise of the powers conferred by clause (w) of section 14 of the Energy Conservation Act, 2001 (52 of 2001) the Central Government, in consultation with the Bureau, hereby specifies the following Scheme, namely:-

Scheme - 1. Short title and commencement

(1)     This Scheme may be called the Carbon Credit Trading Scheme, 2023.

(2)     It shall come into force on the date of its publication in the Official Gazette.

Scheme - 2. Definitions

(1)     In this Scheme, unless the context otherwise requires,-

(a)      "Act" means the Energy Conservation Act, 2001 (52 of 2001);

(b)      "accredited carbon verification agency" means an agency accredited by the Bureau to carry out verification activities under the carbon credit trading scheme;

(c)      "carbon credit" means a value assigned to a reduction or removal or avoidance of greenhouse gas emissions achieved and is equivalent to one ton of carbon dioxide equivalent (tCO2e);

(d)      "carbon credit certificate" shall have the same meaning as assigned to it in clause (da) of section 2 of the Act;

(e)      "carbon credit trading scheme" shall have the same meaning as assigned to it in clause (db) of section 2 of the Act;

(f)       "Commission" means the Central Electricity Regulatory Commission referred to in sub-section (1) of section 76 of the Electricity Act, 2003 (36 of 2003);

(g)      "compliance mechanism" means a mechanism under this Scheme where the obligated entities shall comply with the greenhouse gas emission norms as may be notified by the Central Government;

(h)     "greenhouse gases" means those gaseous constituents of the atmosphere, both natural and anthropogenic, that absorb and re-emit infrared radiation and the expression greenhouse gases include, but not limited to, carbon dioxide (CO2), methane (CH4), nitrous oxide (N2O), hydrochlorofluorocarbons (HCFCs), hydrofluorocarbons (HFCs), perfluorocarbons (PFCs), and sulfur hexafluoride (SF6);

(i)       "Indian carbon market framework" means a national framework established with an objective to reduce or remove or avoid the greenhouse gases emissions from the Indian economy by pricing the greenhouse gases emission through trading of the carbon credit certificates;

(j)       "meta-registry" means the national greenhouse gas registry that will serve the following purposes, namely: -

(i)       data management including Market Based Mechanisms and National Inventory Management Systems; and

(ii)      transaction with features of establishing the linkages with any national or international registry of any market-based mechanism;

(k)      "non-obligated entities" means registered entities that can purchase the carbon credit certificates on voluntary basis;

(l)       "obligated entities" means registered entities that are notified under the compliance mechanism;

(m)    "power exchange" means an electronic trading platform as defined under sub-clause (as) of clause (1) of regulation 2 of the Central Electricity Regulatory Commission (Power Market) Regulations, 2021 published in the Gazette of India vide L-1/257/2020/CERC dated 15th February, 2021;

(n)     "registered entity" shall have the same meaning as assigned to it in clause (qa) of the section 2 of the Act;

(o)      "Registry" means the agency designated as such to perform such functions as defined in this framework in respect of carbon credit trading scheme;

(2)     The words and expressions used herein and not defined but defined in the Act, the Environment Protection Act, 1986 (29 of 1986) and the Electricity Act, 2003 (36 of 2003) shall have the meanings respectively assigned to them in those Acts.

Scheme - 3. National Steering Committee for Indian Carbon Market

(1)     The Central Government shall constitute the National Steering Committee for Indian carbon market.

(2)     The governance of the Indian carbon market and direct oversight of its functioning shall vest in the National Steering Committee for Indian carbon market.

(3)     The National Steering Committee for Indian carbon market shall consist of the following members, namely: -

(a)      Secretary, Ministry of Power- ex-officio-Chairperson;

(b)      Secretary, Ministry of Environment, Forest and Climate Change - ex-officio Co-chairperson;

(c)      Joint Secretary to the Government of India or above from the Ministry of Finance - ex-officio Member;

(d)      Joint Secretary to the Government of India or above from Niti Aayog - ex-officio Member;

(e)      Joint Secretary to the Government of India or above from the Ministry of Power - ex-officio Member;

(f)       Joint Secretary to the Government of India or above from the Ministry of Environment, Forest and Climate Change- ex-officio Member;

(g)      Joint Secretary to the Government of India or above from the Ministry of New and Renewable Energy - ex-officio Member;

(h)     Joint Secretary to the Government of India or above from the Ministry of Steel - ex-officio Member;

(i)       Joint Secretary to the Government of India or above from the Ministry of Coal - ex-officio Member;

(j)       Joint Secretary to the Government of India or above from the Ministry of Chemicals and Fertilizers - ex-officio Member;

(k)      Joint Secretary to the Government of India or above from the Ministry of Petroleum and Natural Gas - ex-officio Member;

(l)       Joint Secretary to the Government of India or above from the Ministry of Agriculture and Farmers Welfare - ex-officio Member;

(m)    two Members - Principal Secretary from the Department of Environment of respective State Government representing the States as nominated by the Central Government- ex-officio- Members;

(n)     two expert Members - coopted by the National Steering Committee who have knowledge in the areas of emissions, carbon trading, climate change, environment and energy - Members;

(o)      Chairperson, the Central Electricity Authority - Member;

(p)      Chairman and Managing Director, the Grid Controller of India Limited -Member;

(q)      any other Members not exceeding three as coopted by the National Steering Committee for Indian carbon market- Member;

(r)      the Director General, Bureau of Energy Efficiency - Member - Secretary;

Scheme - 4. Functions of National Steering Committee

(1)     The National Steering Committee shall discharge following functions, namely: -

(a)      Recommend to Bureau for the formulation and finalisation of procedures for institutionalizing the Indian carbon market;

(b)      recommend to Bureau for the formulation and finalisation of the rules and regulations for the functions of Indian carbon market;

(c)      recommend to Bureau for the formulation of specific greenhouse gases emission targets for the obligated entities;

(d)      recommend to Bureau for the formulation and finalisation of guidelines regarding trading of carbon credit certificates outside India;

(e)      recommend to Bureau to issue carbon credit certificate;

(f)       recommend to Bureau for the development of the process or conditions for crediting period or renewal or expiry of carbon credit certificate;

(g)      to monitor the functions of Indian carbon market;

(h)     recommend to Bureau to constitute any Committee or Working group as required in connection with Indian carbon market; and

(i)       any other functions assigned to it by the Central Government.

(2)     The Chairperson shall call the meeting at least once in a quarter of every year.

Scheme - 5. Bureau as administrator and its functions

(1)     The Bureau shall be the Administrator for the Indian carbon market.

(2)     As the administrator, the Bureau shall discharge the following functions, namely: -

(a)      to identify sectors and potential for reduction of greenhouse gases emissions in such sectors and recommend to the Ministry of Power to include such sectors in Indian carbon market;

(b)      to develop trajectory and targets for the entities under compliance mechanism;

(c)      to issue the carbon credits certificate based on the recommendation of the National Steering Committee for Indian carbon market and subsequent approval of the Central Government;

(d)      to develop market stability mechanism for carbon credits;

(e)      to develop the procedure for accreditation and functions of accredited carbon verification agency;

(f)       to accredit the agencies in accordance with the approved procedure for accredited carbon verification agency;

(g)      to determine, the fees and charges payable by the registered entities with the approval of Central Government, for the purposes of meeting the cost and expense towards the implementation of this Scheme;

(h)     to develop the process or conditions for crediting period or renewal or expiry of carbon credit certificates;

(i)       to develop data submission formats, forms for effective functioning of Indian carbon market;

(j)       to undertake capacity building activities for the stakeholders;

(k)      to develop and maintain the information technology infrastructure including the user guidance platform required for Indian carbon market;

(l)       to maintain secure database with all security protocols as approved by the Central Government;

(m)    to constitute any Committee or working group as recommended by the National Steering Committee for Indian carbon market; and

(n)     any other functions assigned to it by the Central Government.

Scheme - 6. Registry and its Functions

(1)     The Grid Controller of India Limited shall be the registry for the Indian carbon market.

(2)     The Registry shall discharge the following functions, in the manner, as may be determined by the Central Government from time to time: -

(a)      to comply with the directions issued by the Bureau from time to time;

(b)      to undertake registration of obligated or non-obligated entities;

(c)      to maintain secure database with all security protocols;

(d)      to maintain records of all transactions;

(e)      to share the transaction records with Power Exchange and Bureau;

(f)       to assist in development of information technology platform for maintaining database of carbon credit certificates;

(g)      to function as meta-registry for India;

(h)     to establish linkages with other National or International registries as approved by the Central Government; and

(i)       any other functions assigned to it by the Bureau.

Scheme - 7. Commission as Regulator for trading activities under Indian Carbon Market

(1)     The Central Electricity Regulatory Commission shall be the regulator for the trading activities under the Indian Carbon Market.

(2)     The Central Electricity Regulatory Commission as a regulator to Indian Carbon Market shall perform the following, namely: -

(a)      to regulate matters relating to trading of carbon credit certificates;

(b)      to safeguard interest of both sellers and buyers;

(c)      to regulate frequency of carbon credit certificates trading; and

(d)      to provide market oversight and take necessary preventive and corrective actions to prevent fraud or mistrust.

Scheme - 8. Technical Committee and its Functions

(1)     The Bureau shall constitute, one or more Technical Committees for different areas as required under compliance mechanism for the purposes of this Scheme.

(2)     Each Technical Committee shall be chaired by a member who is an expert and shall possess such eligibility and experience in respective sector as may be determined by the Bureau.

(3)     Each Technical Committee shall consist of other members as may be required by the Bureau.

(4)     Each Technical Committee shall perform functions for the purposes of this Scheme.

(5)     The Technical Committee shall make its recommendations to the Bureau, in respect of the matters assigned to it.

Scheme - 9. Accredited Carbon Verification Agency

(1)     The Bureau with prior approval of the Central Government shall determine the procedure including eligibility criteria for accreditation of any agency to function as accredited carbon verification agency based on the recommendation of the National Steering Committee for Indian carbon market.

(2)     The Accredited carbon verification agency shall perform functions for the purposes of this Scheme as determined by the Bureau from time to time.

Scheme - 10. Trading of carbon credit certificates

(1)     The Commission shall register the power exchanges and approve the carbon credit certificate trading in the Indian carbon market, from time to time;

(2)     The power exchange shall seek approval of the Commission for their respective bylaws and rules for trading of certificates in the power exchange.

(3)     The power exchanges shall perform functions regarding trading of carbon credit certificates, in accordance with the regulations notified by the Commission.

Scheme - 11. Compliance Mechanism

(1)     The sectors and the obligated entities to be covered under the compliance mechanism shall be decided by the Ministry of Power based on recommendations of the Bureau;

(2)     The Bureau shall undertake studies for the sectors or obligated entities as decided in sub-paragraph (1) for recommending the targets in terms of ton of carbon dioxide equivalent (tCO2e) per unit of equivalent product after taking into account all relevant aspects including available technologies and likely cost of their implementation;

(3)     The Ministry of Power, after duly considering the recommendations of Bureau and National Steering Committee for Indian carbon market, shall recommend the notification of greenhouse gases emission intensity targets to the Ministry of Environment, Forest and Climate Change for notification under the Environment Protection Act, 1986;

(4)     The obligated entities shall be required to achieve greenhouse gases emission intensity in accordance with the targets as may be notified by the Ministry of Environment, Forest and Climate Change;

(5)     The obligated entities shall also be required to meet any other targets such as use of non-fossil energy consumption or specific energy consumption as may be notified by the Ministry of Power under the Act as amended from time to time;

(6)     The obligated entities shall be issued carbon credit certificates for their achievement in reducing the greenhouse gases emission intensity exceeding the target set for such obligated entities, based on the recommendation of National Steering Committee for Indian carbon market;

(7)     The obligated entities who did not achieve their targeted reduction in greenhouse gases emission intensity shall meet shortfall by purchasing carbon credits certificates from Indian carbon market;

Scheme - 12. Detailed procedure

(1)     The National Steering Committee for Indian carbon market and other authorities shall develop the detailed procedure for operationalising the Indian carbon market, in accordance with this Scheme.

(2)     The detailed procedure shall contain the following, namely: -

(i)       criteria for issuance of carbon credit certificates;

(ii)      validity of carbon credit certificates;

(iii)     floor and forbearance price of carbon credit certificates;

(iv)    requirement, format and timeline for submissions;

(v)      monitoring, reporting and verification; and

(vi)    any other related and incidental matters.

Scheme - 13. Power to issue directions

The Bureau may, from time to time, issue such directions and orders to the registered entities, with the approval of the Central Government, as considered appropriate for the implementation of this Scheme.