Explained: Energy Conservation Bill – India's Step Toward Meeting Climate Goals?

LS' passing of Energy Conservation (Amendment) Bill, 2022, is being touted as a step towards meeting climate goals.

The Lok Sabha's passing of the Energy Conservation (Amendment) Bill, 2022, is being touted by many as India's major step towards meeting our climate goals.

The bill is expected to directly contribute to India's Nationally Determined Contributions (NDC), which are India's commitments towards climate change action under the Paris Agreement.

"With the passage of time, and in the context of the energy transition, with special focus on the promotion of new and renewable energy and National Green Hydrogen Mission, a need has arisen to further amend the said (Energy Conservation) Act to facilitate the achievement of 'Panchamrit' as five nectar elements presented by India in Conference of Parties -26 in Glasgow last year."

Statement of Objects and Reasons of the Bill

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

The Energy Conservation (Amendment) Bill, 2022 was proposed in the Lok Sabha on 3 August. On Tuesday, 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 Energy Conservation Bill 2022 is a landmark step in India's journey towards an efficient and clean future. The provisions of the bill will help in boosting renewable energy consumption and have economy-wide implications. Going forward, using the bill to set ambitious sectoral targets and standards could help in realizing India's development, energy, and climate goals."

Madhura Joshi, Senior Associate, India Energy Transitions Lead, E3G

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. Failure to meet this obligation may result in a penalty of up to Rs 10 lakh.

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

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.

"What India needs now is also the promotion of other flexible generation sources for increasing penetration of RE. There needs to be a change in market design so that right price signals are created for the development of flexible generation sources which are expensive now, but with large scale deployment, the prices will go down."

Vibhuti Garg, Energy Economist, Lead India Institute for Energy Economics and Financial Analysis

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.

"Ultimately, every unit of energy saved or conserved is critical for reducing emissions. The carbon trading system could be an important tool to reduce greenhouse gas emissions and an effective way for industries to earn credits and get a new source of funding."

Bharath Jairaj, Director, Energy program, WRI India

Hopes Pinned on the Bill

The reactions towards this bill have been largely positive.

Experts hope that the bill will promote the deployment of non-fossil fuels and carbon trading. Increased obligation on states to increase their share of non-fossil fuels in their energy mix is expected to push the demand for it.

Carbon trading will further incentivise people to earn more revenues and thereby decarbonise their operations. Further, this will promote RE resource-rich states to sell surplus RE energy to other states to meet their RPO obligations, according to Energy Economist Vibhuti Garg.

Bharath Jairaj, WRI Energy Program's Director, also added that the Electricity Conservation Bill would improve the existing EC Act, 2001, by looking beyond energy efficiency.

It mandates the use of non-fossil sources such as green hydrogen, green ammonia, biomass, and ethanol in industries, sets up a domestic market enabling the trading of carbon credits, and includes large residential building complexes under the ambit of the Energy Conservation Building Code (ECBC).

Further, it will enhance the scope of ECBC by including renewable energy and green building measures in new constructions and promoting the use of renewable energy sources in the end-use energy demand sectors to align with India’s climate commitments.