Energy Conservation (Amendment) Bill 2022 [UPSC Notes]

The Energy Conservation (Amendment) Bill 2022, passed by Rajya Sabha in December 2022, aims to create a domestic carbon market in the country. In this article, you can read about the Energy Conservation (Amendment) Bill 2022, its important features and associated concerns for the IAS exam polity and environment segments.

The Energy Conservation (Amendment) Bill 2022

• The bill would promote the domestic carbon market in India. The carbon market would incentivize emission-reduction actions, leading to increased investment in clean energy and energy efficiency by the private sector in residences, commercial buildings, and industrial spaces.
• The bill creates agencies for issuing carbon credit certificates domestically while banning firms from exporting their carbon credits outside the country. 
• The Act aims to strengthen India’s carbon reduction promises under the Paris Agreement, COP 26, and COP 27.
• There are two types of institutional mechanisms that regulate carbon emissions developed by the EU in 2005, namely “cap-and-trade” and “command-and-control.”
• Cap-and-trade is a market-based mechanism operating on the principle of issuing permits or allowances for emissions or pollution that add up to a maximum or capped amount, which is progressively decreased year by year.
• Polluters exceeding their permitted limits can buy permits from others who have permits available for sale. 
• As per ICAP (International Carbon Action Partnership) there are 25 well-functioning emissions trading schemes or ETSs, currently in force in countries like Japan, the UK, the US, Canada, Mexico, etc. 
• Surat, in 2019, implemented a pilot emissions trading scheme (ETS) for particulate matter pollution. It had led to a reduction of 24% in particulate matter pollution for participating industries. Ludhiana and Ahmedabad plan to follow the same model.
• Command-and-control mechanisms thrust a cap from the top on all industries uniformly, which has been unsuccessful in most geographies due to the inability of legacy industries to quickly generate climate finance for the green transition.
• It is important to institutionalize carbon markets not only in government and businesses but also with wider communities coming together into community-based organizations (CBOs) or self-help groups (SHGs) and participating in the voluntary carbon market framework to make net zero effects. 
• There is a better implementation of the 3Rs (reduce, recycle, reuse) and reduction of methane by better management and processing of village-level waste.

Get more details about the bill here: Sansad TV Perspective: The Energy Conservation (Amendment) Bill, 2022

The Energy Conservation (Amendment) Bill 2022 Concerns

• The Bill currently makes no mention of local communities participating in the carbon credit market, discriminating against them and keeping them out of a mechanism to raise money through carbon credit certificates.
• The act doesn’t incorporate regulations that are needed to address market failures caused by large players who are carbon hotspots but do not make efforts to transition to low-carbon business models. 
• Carbon trading should include caps on individual players’ carbon emissions and focus on reducing fossil fuel use for all. Deceptive means of producing carbon permits for short-term profit should not be allowed, as they perpetuate the fossil fuel industry. 
• The bill empowers State Electricity Regulatory Commissions to regulate and monitor the electricity sector, but the specific details of how this will be done effectively remain unclear.
• There is no mention of allowing carbon certificates to be converted into other financial instruments, such as cash, bonds, equities, or securities, if the certificate holder wants to do so.

Energy Conservation (Amendment) Bill 2022:- Download PDF Here