Introduction
India recently announced draft regulations for compulsory greenhouse gas (GHG) emission targets under the Carbon Credit Trading Scheme (CCTS). However, the iron and steel sector was noticeably excluded, with targets to be announced later.
Current Regulations and Exclusions
The draft regulations currently include 282 units across sectors such as aluminium, cement, chlor-alkali, and pulp and paper, representing leading conglomerates like Vedanta, Hindalco, and UltraTech.
- Steel, contributing about 12% of India's GHG emissions, is excluded for now.
- A green steel program, parallel to CCTS, started with plans for the government to procure low-carbon steel.
Concerns on Target Aggressiveness
Experts express concerns over the conservative nature of current emission targets, citing the need for more aggressive targets to avoid double carbon taxation and maintain industry competitiveness.
CCTS Compliance and Challenges
- CCTS aims at emissions intensity reduction rather than overall emissions reductions.
- Modest targets and short compliance durations (3-4 years) might discourage investment in clean technology.
- Longer target durations, like those in the EU ETS, are advocated to provide certainty for investors.
International Comparisons
Other emission trading schemes, such as the EU ETS and Korean ETS, have longer target durations and are more stringent, offering a framework for stable investment in emission reduction technologies.
Carbon Pricing and Global Implications
- Current global carbon prices vary significantly, with the EU averaging 70-80 euros per tonne of CO2, while India remains at a lower range.
- The IMF proposes differentiated carbon price floors based on income levels.
India's Strategy and Economic Impact
India's strategy involves a balance between economic growth and emissions reduction, with a focus on intensity rather than absolute reductions.
Target Setting and Compliance
- The compliance scheme plans to include over 800 units, potentially covering 25% of India's GHG emissions.
- Targets are set based on feasible technologies and marginal abatement costs to prevent excessive burdens on industries.
Conclusion
CCTS is seen as a response to international carbon taxes, aiming to balance industrial competitiveness with climate commitments. However, a long-term strategy focusing on low-carbon development is needed for achieving 'net zero' targets.
