India Launches Flagship Carbon Trading Scheme
Paryavaran Mitra
India Launches Flagship Carbon Trading Scheme
British High Commission New Delhi
July 2012
Summary
India launches a mandatory trading scheme to promote industrial energy efficiency, a major step towards delivery of its target for reducing carbon intensity of its GDP. The Indian government singles out the UK for thanks. We have supported the design and delivery of this initiative, which has also generated commercial opportunities for UK energy firms. A good return on a modest Prosperity Fund investment.
Detail
On 4 July Minister of Power Shinde launched India’s Perform, Achieve and Trade (PAT) energy efficiency trading scheme to an Indian industry and media audience. The scheme sets binding energy efficiency improvement targets for 478 energy intensive installations across 8 sectors, including power stations, iron and steel, and cement. These account for around 80% of India’s industrial energy use and 33% of total commercial energy use. Installations covered must meet their targets either by their own actions or by buying certificates from others who over-achieve.
Initial targets are deliberately reasonably modest, with the average installation target being a 4% improvement in energy efficiency, aiming to save 6.7 million tonnes of oil equivalent over its first 3 years (i.e. by 2014/15) - a carbon saving of 29 million tonnes of CO2. The PAT scheme forms a major plank of India's Copenhagen commitment to reduce carbon intensity by 20-25% by 2020 from 2005 levels. At the launch event, the Power Ministry said the energy savings from PAT will account for about half of India’s total energy efficiency effort under the 12th 5 Year Plan.
The scheme is also potentially a powerful model for developing countries considering energy efficiency options: at the launch, the Government of India highlighted that “developing countries would have a proven framework to study and incorporate, with the knowledge that emerging economies can achieve energy savings in a cost-effective way that boosts economic growth”.
In his speech, Shinde singled out the UK – and DECC Minister Greg Barker – for our collaboration on the design of the scheme. We have done so through the FCO Prosperity Fund, supported by DFID, DECC and UKTI and drawing on UK experience of similar schemes. This practical and strategic advice has been influential on issues including extending the scheme to more installations and sectors, ways to ensure liquidity in the market for PAT certificates and ways to build into the scheme incentives for companies to front-load energy savings. We have involved UK energy consultancies, who played a crucial role in the success of schemes in UK, to feed in lessons and to explore the significant commercial opportunities this scheme creates.
So far, so good. But the implementation challenge lies ahead. Industry is engaged although many of the installations have missed the first deadline for submitting their plans for energy savings. But most are expected to meet a revised deadline. We will continue to help during the implementation of the scheme.
A further FCO Prosperity Fund project will:
work with the Confederation of Indian Industry on energy efficiency opportunities in specific PAT sectors;
showcase UK industry lessons and expertise on energy efficiency;
-
provide further support to the Bureau of Energy Efficiency on implementation including target enforcement, penalties, and setting next phase targets;
-
offer options to overcome energy efficiency financing challenges, including beyond those installations currently covered by the scheme.
Comment
The launch of the Perform Achieve and Trade scheme is a major domestic policy step for India, and for our own climate change and energy efficiency policy goals. It will also offer significant commercial opportunities for the UK. Around 20 UK technology and consultancy companies have already participated in events we have organised here, and some already have promising business leads in India. We will continue to help identify new opportunities for UK business from this initiative.
Disclaimer
The purpose of the FCO Country Update(s) for Business (”the Report”) prepared by UK Trade & Investment (UKTI) is to provide information and related comment to help recipients form their own judgments about making business decisions as to whether to invest or operate in a particular country. The Report’s contents were believed (at the time that the Report was prepared) to be reliable, but no representations or warranties, express or implied, are made or given by UKTI or its parent Departments (the Foreign and Commonwealth Office (FCO) and the Department for Business, Innovation and Skills (BIS)) as to the accuracy of the Report, its completeness or its suitability for any purpose. In particular, none of the Report’s contents should be construed as advice or solicitation to purchase or sell securities, commodities or any other form of financial instrument. No liability is accepted by UKTI, the FCO or BIS for any loss or damage (whether consequential or otherwise) which may arise out of or in connection with the Report.