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UK Recognises India’s Carbon Credit Trading Scheme
The U.K. officially recognises India’s Carbon Credit Trading Scheme (CCTS) under its carbon tax mechanism. The recognition is linked to the treatment of India’s carbon credits in the U.K. mechanism and is relevant for Indian exporters and India-UK carbon market cooperation.
Carbon Credit Trading Scheme:
| Dimension | Key Details |
|---|---|
| Type | CCTS comprises India’s national framework designed to decarbonise the economy by pricing greenhouse gas (GHG) emissions. |
| Aim | It provides for incentivising and supporting entities in their efforts to decarbonise the Indian economy. |
| Objective | It provides for reducing, removing, or avoiding greenhouse gas emissions from the Indian economy by carbon pricing such emissions through the trading of Carbon Credit Certificates. |
| Carbon credits | Carbon credits comprise tradable permits or virtual certificates representing the reduction, avoidance, or removal of 1 metric ton of carbon dioxide or an equivalent greenhouse gas from the atmosphere. |
| Legal basis | CCTS is notified under the Energy Conservation (Amendment) Act, 2022. |
| Administration | CCTS is managed by the Ministry of Power and administered by the Bureau of Energy Efficiency (BEE). |
| Core principle | Companies that emit less greenhouse gas than their assigned target earn tradable credits, while companies that exceed their limits must buy credits or face financial penalties. |
| Key elements | CCTS comprises 2 key elements: a compliance mechanism for obligated entities (primarily industrial sectors) and an offset mechanism for voluntary participation. |
| Link with Indian Carbon Market (ICM) | CCTS provides for laying the foundation for the Indian Carbon Market (ICM) by establishing the institutional framework. |
| Replacement of PAT | CCTS replaces the legacy Perform, Achieve, and Trade (PAT) energy efficiency program, shifting the focus directly from overall energy savings to verifiable emissions intensity reductions. |
| Significance of U.K. recognition | It can lower Carbon Border Adjustment Mechanism (CBAM)-related costs for Indian exporters, prevent double carbon charging, improve export competitiveness, and strengthen India-UK cooperation on carbon markets. |