The Indian Parliament on December 12, passed the Energy Conservation (Amendment) Bill 2022 laying the legal framework for establishing a carbon credit market, mandatory use of non-fossil fuel including green hydrogen, green ammonia, biomass and ethanol and energy conservation code for buildings.
The Bill was ratified by the Rajya Sabha (Upper House) of Parliament on December 12 and with the Lok Sabha (Lower House) already approving it last August, the Ministry of Power would shortly issue notification transforming and giving effect to in in form of Energy Conservation (Amendment) Act 2022.
The Act will lay down key legal framework in areas of:
- Carbon Credit: It will empower the central government to specify a carbon credit trading scheme, including introduction of tradeable permits to produce a specified amount of carbon dioxide or greenhouse emission. The central government or a specific authorized agency set up for the purpose may issue carbon credit certificates to entities registered with it and recipient of the certificates entitled to trade in these certificates and any other person may purchase these credit certificates on voluntary basis.
- Obligations to use non-fossil sources of energy: The Act will empower the central government to specify energy consumption standards. It will allow the government to designate consumers to meet a minimum share of energy consumption from non-fossil sources.
Different consumption thresholds may be specified for different non-fossil sources and consumer categories. Designated consumers include: (i) industries such as mining, steel, cement, textile, chemicals, and petrochemicals, (ii) transport sector including Indian Railways, and (iii) commercial buildings, as specified in the schedule. Failure to meet this obligation will be punishable with a penalty of up to INR 1 million and liable to attract an additional penalty of up to twice the price of oil equivalent of energy consumed above the prescribed norm.
- Energy conservation code for buildings: The Act will empower the central government to specify Energy Conservation Code for buildings. The code prescribes energy consumption standards in terms of area. This will provide for an ‘Energy Conservation and Sustainable Building Code.’ It will be applicable for commercial buildings with connect power load of 100 kilowatts or contract demand of 120 kilo-volt ampere or above.
- Standards for Vehicles and Vessels: Under the Act, the energy consumption standards may be specified for equipment and appliances which consume, generate, transmit, or supply energy. It expands the scope to include vehicles (as defined under the Motor Vehicles Act, 1988), and vessels (includes ships and boats). The failure to comply with standards will be punishable with a penalty of up to INR 1 million. Non-compliance in case of vessels will attract an additional penalty the price of oil equivalent of energy consumed above the prescribed norm. Vehicle manufacturers in violation of fuel consumption norms will be liable to pay a penalty of up to INR 50,000 per unit of vehicles sold.
- Composition of governing council of Bureau of Energy Efficiency (BEE): The Act provides for expansion of BEE including increasing number of governing council members from 26 to 31-37 and include 7 member representing industries and consumers.
Participating in debate on the Bill in the Upper House of Parliament, minister of Power, R K Singh said, “the domestic carbon market scheme will be a key step in achieving India’s nationally determined contributions under the Paris Climate Change Pact.”
“It will obligate consumers of power like distribution companies, big consumers like industries with captive power plants to reduce carbon emissions. Those that reduce a lot more than stipulated will get carbon credits and those not able to achieve will have to either buy credits or pay a penalty,” Singh said in Parliament.
Energy Conservation (Amendment) Bill 2022:
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