India’s carbon credit scheme receives U.K. recognition: official, Pg13

Key Highlights:

• The U.K. has recognized India’s Carbon Credit Trading Scheme (CCTS) as a qualifying criterion for pricing relief under its Carbon Border Adjustment Mechanism (CBAM).
• This recognition is expected to reduce the tax burden on Indian exporters under the U.K. CBAM.
• His Majesty’s Treasury confirmed the inclusion of CCTS in the U.K.'s indicative list of overseas carbon pricing schemes.
• The communication was addressed to the Bureau of Energy Efficiency under the Ministry of Power.
• The inclusion falls under the Carbon Border Adjustment Mechanism (Calculation of CBAM Rate and Determination of Carbon Price Relief) Regulations 2026.

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Detailed Insights:

• India's Carbon Credit Trading Scheme (CCTS) was officially notified on June 28, 2023, under the Energy Conservation (Amendment) Act, 2022.
• The CCTS aims to establish India's domestic carbon market, initially covering energy-intensive sectors like aluminium, cement, and iron & steel.
• It operates as a compliance mechanism, setting greenhouse gas emission intensity targets for obligated entities.
• The U.K. CBAM is slated for introduction on January 1, 2027, designed to prevent "carbon leakage" by taxing carbon-intensive imports.
• This mechanism will initially apply to imports in sectors such as aluminium, cement, fertiliser, hydrogen, and iron and steel.
• The U.K. CBAM calculates a tax based on the embodied emissions of imported goods, allowing for a deduction if a qualifying overseas carbon price has already been paid.
• The Bureau of Energy Efficiency (BEE) is a statutory body under the Ministry of Power, established on March 1, 2002, under the Energy Conservation Act, 2001.
• The Ministry of Power is responsible for the development, regulation, and growth of India's power sector, including electricity generation, transmission, and energy efficiency.

Key Concepts Involved:

• Carbon Credit Trading Scheme (CCTS): India's national market-based mechanism for reducing greenhouse gas emissions by allowing the trading of carbon credit certificates.
• Carbon Border Adjustment Mechanism (CBAM): A policy tool used by importing countries to impose a levy on carbon-intensive goods to ensure imported products face a carbon price comparable to domestic ones.
• Carbon Credits: Tradable permits, each representing the reduction or removal of one tonne of carbon dioxide equivalent (tCO2e) from the atmosphere.
• Carbon Pricing: A method that assigns a monetary cost to greenhouse gas emissions to incentivize polluters to reduce their carbon footprint.