Assessing India’s carbon credit trading scheme targets, Pg6

Key Highlights:

• Emission intensity targets have been set for 8 of 9 industrial sectors under the compliance mechanism of Carbon Credit Trading Scheme (CCTS)
• Sectors include aluminium, cement, paper & pulp, chlor-alkali, iron & steel, textile, petrochemicals, and refineries.
• Assessment of target ambition should be done at the economy-wide level, not at the sector or entity level.
• Historical PAT scheme showed sector-wise mixed results, but aggregate energy efficiency improved.
• Entity-level targets affect financial flows but not overall emissions reduction outcomes.
• CCTS targets show an estimated Emission Intensity of Value Added (EIVA) reduction of 1.68% annually, compared to 2.53% projected for overall manufacturing.
• Early signs suggest CCTS targets may not be ambitious enough to align with India’s 2030 and 2070 climate commitments.

Detailed Insights:

• Perform, Achieve and Trade (PAT) Scheme data reveals that energy intensity increased in some sectors but declined in others, yet overall energy use per economic output declined.
• This validates that market-based mechanisms like PAT and CCTS can achieve aggregate emissions efficiency even if not uniform across all entities.
• Comparing new targets with historical sectoral performance is not meaningful; ambition must be linked to future decarbonisation pathways.
• India’s NDC-aligned scenario projects a 3.44% annual decline in energy sector emissions intensity, while manufacturing is expected to decline at 2.53% annually.
• In contrast, CCTS targets yield only a 1.68% average annual EIVA reduction, indicating a potential shortfall in ambition.
• Power sector likely to decarbonise faster due to lower-cost mitigation options, but industry must also scale up ambition.
• Future assessments must be aligned with net-zero pathways, not business-as-usual performance baselines. 

Scientific/Technical Concepts Involved:

• Carbon Credit Trading Scheme (CCTS): A market-based mechanism where industries with excess emission reductions can sell credits to those who fail to meet targets.
• Emission Intensity of Value Added (EIVA): Measure of CO₂ emissions per unit of value added, used to assess sectoral decarbonisation.
• Perform, Achieve and Trade (PAT) Scheme: India’s energy efficiency programme for large industries, allowing trading of energy savings.
• Net-Zero Target: India aims to reach net-zero emissions by 2070, with interim goals such as reducing emissions intensity of GDP by 45% by 2030.