Date: 20/04/2023

Relevance: GS-3: Conservation, Environmental Pollution, and Degradation, Environmental Impact Assessment.

Key Phrases: Nationally Determined Contributions (NDCs), Energy Conservation (Amendment) Act 2022, carbon credit trading scheme, Market-based mechanism, Kyoto Protocol, Paris Agreement, Clean Development Mechanism.

Why in News?

• Under its Nationally Determined Contributions (NDCs), India now stands committed to reducing the emissions intensity of its GDP by 45 percent by 2030, from the 2005 level, and achieving net zero by 2070.
• The Energy Conservation (Amendment) Act 2022 aims to manoeuvre India on the right track. The Act gave a green signal to the Centre for creating a carbon credit trading scheme.
• BloombergNEF research report says that the total value of carbon credits produced and sold could reach $1 trillion globally by 2037.
• Thus, participation in the carbon trading market is prudent both from an environmental and commercial angle.

India’s emission:

• India’s per capita emissions currently stand at a mere 1.8 tons of CO2e (versus the US at 14.7 and China at 7.6).
• However, India is the world’s third-largest emitter at 2.9 Giga Tons CO2 equivalent (around 4.9 percent of global emissions).

Carbon Trading:

• Carbon trading is a market-based mechanism that incentivizes companies to reduce their greenhouse gas emissions by allowing them to trade carbon credits, representing the right to emit a certain amount of carbon dioxide.
• This creates a financial incentive for companies to reduce their emissions and helps countries meet their emissions reduction targets, making it an important tool in the fight against climate change.
• Article 17 of the Kyoto Protocol allows countries that have emission units to spare — emissions permitted to them but not “used” — to sell this excess capacity to countries that are beyond their targets thus enabling emissions trading. This was reaffirmed in Article 6 of the Paris Agreement.
• India leads the pack, accounting for 40-50 percent of annual carbon credits sales and having 1,685 projects registered under UNFCCC’s CDM (Clean Development Mechanism) as of March 2022.

Transport sector:

• Contribution:
  • According to India’s Third Biennial Update Report (2021) to UNFCCC, the transport sector is estimated to have contributed to 274 million tonnes of CO2 equivalent emissions per year in 2016, accounting for roughly 11 percent of the total emissions generated by the entire economy.
• Roadways:
  • Around 70 percent of freight movement and 90 percent of passenger movement can be attributed to the road sector alone, which is the most carbon-intensive mode of all available options.
• Railways:
  • Rail freight typically produces lower emissions per tonne-km than road freight, mainly due to the more fuel-efficient locomotives and the lower rolling resistance of trains compared to trucks.
  • Therefore, the potential for rail systems to earn carbon credits is immense owing to their low carbon emission intensity (approx. 23 percent of roadways).
• Metro:
  • The Delhi Metro has earned 4.4 million carbon credits which were generated through innovative technologies of regenerative braking etc. and due to Modal Shift.
  • Following suit, in December 2022, the Ministry of Housing and Urban Affairs advised metro rail corporations to register for carbon credits.

Standards and Protocols:

• The carbon credit ecosystem follows a set of guidelines and protocols for registering and issuing carbon credits, which are established by the standard issuer.
• Each standard maintains its own registry, and notable examples include CDM, Verra, and Gold Standard.
• To obtain credits, projects undergo a thorough assessment by a third-party auditor.
• After issuance, the project developer may either sell the credits to a buyer or utilize them for their own purposes.
• According to IEA, transport as a sector accounted for 37 percent of CO2 from end-use sectors globally in 2021 and it could reach as high as 50 percent by 2030. Yet the transport sector comprises only 0.34 percent of all registered CDM projects.

Challenges and efforts:

• The process of turning carbon credits from a concept to reality can be challenging, as it often involves:
  • upfront investment
  • lengthy gestation periods
  • the possibility of not being approved
• Nevertheless, gradual efforts are being made in the projects where the sheer volume and the large scale of the project make it worthwhile for participation in carbon markets.

Potential projects:

• Recently NCRTC, which is implementing Regional Rapid Transit System (RRTS) project across the NCR, also invited bids for assessing the potential of carbon credits.
• Dedicated freight corridors (DFCs) — from Ludhiana to Dankuni (EDFC) and Dadri to JNPT Mumbai (WDFC) — are expected to make freight movement — less carbon and energy intensive.
• With commissioning expected to be completed by March 2024, DFC alone is estimated to lessen carbon emissions by 455 million tonnes over a 30-year period.
• Indian Railways’ commitment to achieving complete electrification by December 2023, reaching net-zero emissions by 2030, and boosting the Railways’ share in freight transport to 45 percent by 2030 — creates a distinctive prospect to utilize carbon markets.

Conclusion:

• India’s commitment to reducing emissions and achieving net zero by 2070 creates a unique opportunity to utilize carbon markets to reduce emissions in the transport sector.
• Indian Railways’ commitment to electrification and reducing emissions by 2030, coupled with its potential to earn carbon credits, offers a significant opportunity to contribute to the goal of reducing emissions and achieving a cleaner, greener future.

Source: The Hindu BL

Mains Question:

Q. Discuss India's approach to carbon trading and its potential for contributing to global emissions reduction goals. Also, highlight the role of the transport sector in India's carbon trading market.