'India's Step Toward Carbon Trading': RS Passes Energy Conservation Bill

This bill is expected to be huge step for India towards fulfilling their Nationally Determined Contributions (NDC).

Rajya Sabha passes Energy Conservation (Amendment) Bill, 2022.

(Photo: iStock)

The Rajya Sabha approved the Energy Conservation (Amendment) Bill on Monday, 12 December 2022. This bill is expected to be huge step for India towards fulfilling their Nationally Determined Contribution (NDC).

The bill aims to achieve this by setting up domestic carbon trading scheme and enforcing big power consumers to meet a portion of their power supply from renewable sources.

'Legislative Teeth to India's Carbon Trading Market'

The bill was heavily debated in the Rajya Sabha on issues specific to the carbon trading scheme.

The opposition was particularly vocal about the center's decision to envisage carbon markets under Energy Ministry rather than the Environment Ministry, which is largely responsible for implementing India's climate commitments.

The amendments have a centralised structure, however each state has its own elements of energy production. The bill largely places the onus of power regulation on a centrally governed organisation-- the Bureau of Energy Efficiency.

"The passing of the Electricity Amendment Bill by the upper house of the Parliament gives legislative teeth to India's domestic carbon credits trading market. I hope to see important structural details emerging soon."

Dr Vaibhav Chaturvedi, Fellow, Council on Energy, Environment and Water CEEW

What Is the Energy Conservation (Amendment) Bill, 2022?

The Energy Conservation (Amendment) Bill, 2022 was proposed in the Lok Sabha on 3 August. On 9 August 2022, the legislation was passed. The bill aimed at ensuring greater use of renewable energy and enforcing penalties on industrial polluters for carbon emissions.

The original Energy Conservation Act, 2001, was created with the intention to provide efficient and effective uses of energy as well as its conservation.

"The new Bill provides scope of efficiency increase in both direct and indirect manner on two counts, (a) directly, because it has now increased the star rating programmes to new sectors, like ships, boats, tyres etc, and (b) indirectly, because, with the carbon credit mechanism and ECERT provisions, the conservations on energy will ensure higher efficient products are used by the end users."

Tirthankar Mandal, Head, Policy Governance, WRI India Energy Program

What Amendments Have Been Made to the Original Act?

The following amendments have been made to the Energy Conservation Act under the recently passed bill:

• Obligation to use non-fossil sources of energy

• Carbon trading

• Energy conservation code for buildings

• Applicability to residential buildings

• Standards for vehicles and vessels

• Regulatory powers of SERCs

• Composition of the governing council of BEE

It allows the government to specify energy consumption standards. Specified consumers also need to meet a minimum share of energy consumption from fossil sources of energy.

The bill also establishes a carbon trading scheme, which allows industries with a tradeable permit to produce a specific amount of carbon emissions.

"Carbon pricing as an instrument will be critical for India to achieve its net-zero target and this has been a bold and ambitious move by the Government of India. CEEW's industry engagement shows that India's industry stakeholders do not have deep experience of the cap and trade market."

Dr Vaibhav Chaturvedi, Fellow, Council on Energy, Environment and Water CEEW

The bill suggests that the energy conservation code for buildings be amended to an energy conserving and sustainable building code. The code prescribes energy consumption standards.

The amendment also changes the applicability of the code to include offices and residential buildings meeting their set criteria.

The Act originally only included energy consumption standards for equipment and appliances that consume, generate, transmit or supply energy. However, this has now been amended to include vehicles and vessels (i.e. boats and ships.)

The Act empowered the State Electricity Regulatory Commissions to enforce any penalties; the bill also allows the SERCs to make regulations for discharging their functions.

The Bureau of Energy Efficiency came into being under the 2001 Act and included a governing council of up to 26 members, which has now been altered to up to 37 members.

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