This blog is based on “Six key aspects of carbon credit trading system that India must get right” by Montek Singh Ahluwalia and Utkarsh Patel, published in Mint on September 3, 2024.
Background
India is set to join an elite group of nations implementing a Carbon Credit Trading Scheme (CCTS), as announced in the recent budget speech (2024–2025). This move places India alongside countries like the EU, UK, China, and South Korea in their efforts to combat climate change through market-based mechanisms.
What is CCTS and why does it matter?
A Carbon Credit Trading Scheme serves as an alternative to traditional carbon taxation. While a carbon tax directly increases fossil fuel costs to discourage their use, CCTS takes a different approach. It establishes a cap on total allowable emissions and creates a market where companies can trade emission permits within this limit. This market-based system offers more flexibility to businesses while achieving the same environmental goals.
For the CCTS to be a major step forward towards decarbonizing the economy, it is essential that the system is properly designed.
CCTS Administration: The Bureau of Energy Efficiency (BEE), which will administer CCTS, The BEE has experience in operating the Perform, Achieve and Trade (PAT) scheme, which was a mandate to improve energy efficiency.
This is a good news, however, the demands of a CCTS design will be higher.
Balancing growth and sustainability through CCTS
