CERC Releases Draft Regulations for Carbon Credit Trading Scheme 2023 to Boost Market Transparency

Posted On - 2 December, 2024 • By - King Stubb & Kasiva

Introduction:

The Central Electricity Regulatory Commission (CERC) has released a set of draft regulations concerning the Carbon Credit Trading Scheme, 2023.[1] These regulations aim to establish a clear and transparent framework for the purchase and sale of Carbon Credit Certificates (CCCs).  

Explanation (Key Points):

  • Applicability: The regulations apply to all CCCs offered for transactions on Power Exchange(s), including contracts in CCCs as approved by the Commission.  
  • Definitions: The regulations provide clear definitions of key terms, such as “Act,” “Administrator,” “Banking and Extinguishment of CCCs,” “Bureau,” “Carbon Credit Certificate (CCC),” “Carbon Credit Trading Scheme (CCTS),” “Commission,” “Compliance Mechanism,” “Compliance Year,” “Market,” “National Steering Committee,” “Non-Obligated Entities,” “Obligated Entities,” “Offset mechanism,” “Power Exchange,” “Power Market Regulations,” “EC Act,” “EP Act,” “Registered entity,” “Registry,” “Floor Price,” and “Forbearance Price.”  
  • Objectives: The regulations aim to create a framework for the exchange of Carbon Credit Certificates for the Obligated and the Non-Obligated entities on Power Exchanges.  
  • Scope: The regulations are applicable to the CCCs offered for transactions on Power Exchange(s), including contracts in CCCs as approved by the Commission in accordance with the provisions of the Power Market Regulations.  
  • Registry: The Grid Controller of India will function as the Registry for the exchange of CCCs.  
  • Functions of the Administrator: The Bureau of Energy Efficiency will act as the Administrator for dealing with CCCs issued under the EC Act.  
  • Value and Validity of Carbon Credit Certificate: The value and validity of the carbon credit certificate are defined in the regulations.  
  • Category of Certificates: CCCs will be categorized by the Bureau for the obligated and the non-obligated entities.  
  • Dealing in the Certificates: CCCs will be dealt with only through the Power Exchange, unless otherwise permitted by the Commission.  
  • Banking and Extinguishment of CCCs: The Banking and Extinguishment of CCCs will be as specified in the Detailed Procedure for Compliance Mechanism and Offset Mechanism of the CCTS 2023.  
  • Pricing of Certificate: The market price of CCCs will be discovered through the process of bidding at the respective Power Exchange.  
  • Market Oversight: The Commission, assisted by the Bureau, will exercise market oversight over CCCs on Power Exchanges.  

Conclusion:

The draft regulations released by CERC establish a transparent and efficient market for carbon credit trading in India. By providing clear guidelines and definitions, the regulations aim to facilitate the exchange of CCCs and promote the country’s transition to a cleaner energy future.

[1] https://www.cercind.gov.in/2024/draft_reg/DN-PoCCC-2024.pdf