Explained: What the Newly Passed Energy Conservation (Amendment) Bill Is All About

As per the new carbon credit trading system it proposes, big power consumers will have to meet a certain portion of their energy from renewable sources.

Kochi: The Rajya Sabha on Monday (December 12) passed the Energy Conservation (Amendment) Bill, 2022. The Bill aims to increase energy efficiency and proposes a carbon credit trading system through which major power consumers will have to ensure that part of their energy requirements are met with renewable energy sources.

The Wire explains what the Bill is about, and what changes it seeks to bring. According to energy scientists, the introduction of a carbon credit system is a “bold” and “ambitious” move by the government. However, much will now depend on training the industrial sector so as to implement and incorporate these changes into the system, they said.

Rajya Sabha passes Bill

The Lok Sabha passed the Bill in August this year after it was tabled by R.K. Singh, Union Minister of New and Renewable Energy. On Thursday, Singh introduced the Energy Conservation (Amendment) Bill in the Rajya Sabha. After discussions and debates, it was passed on December 12. Speaking on the floor of the Rajya Sabha, Singh said that India is a leader when it comes to renewable energy.

The Ujala scheme (Unnat Jyoti by Affordable LEDs for All, which distributes LED bulbs across households in the country) has resulted in a reduction of 105 million tonnes of carbon dioxide, and saved 129 billion units of energy, Singh said. In 2015, India had pledged in COP21 in Paris that by 2030 we will reduce the emissions intensity of our economies by 33-35% – we have already reduced it by more than 30% and we are only in 2022, he said.

“That is why in renewable energy and climate action and clean energy, India is the undisputed leader,” he said while speaking about the Bill in the Rajya Sabha on Monday. The Energy Conservation (Amendment) Bill will add to this, he said.

“This is a futuristic Bill,” he continued, and one that is “advanced” over most of the world. “With renewable energy we are greening our grid,” he added. Elements of the Bill are “visionary”, and will lead the way as far as energy transition and climate action are concerned, he said.

The Energy Conservation (Amendment) Bill

The Energy Conservation (Amendment) Bill aims to put a cap on carbon emissions and consumption by big consumers, by instituting a carbon credit mechanism. Under this mechanism, big consumers will have to mandatorily meet a certain portion of their energy requirements through renewable energy sources. These sources of renewable energy also include green hydrogen, biomass and ethanol.

If the big consumers overachieve, and meet more of their energy requirements from such cleaner sources of energy, then they will be given carbon credits, Singh said. If they underachieve, or are unable to meet the targets, they will be either penalised for it or will have to buy carbon credits to compensate. This will be important for India to achieve its targets under the Nationally Determined Contributions, said Singh. The NDCs are a set of long-term steps that countries are required to undertake as part of their efforts to cut down on carbon emissions as per the Paris Agreement of 2015.

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The Bill also proposes an “energy conservation and sustainable building code” for large buildings (which are connected to at least 100 kilowatt of power) including commercial and residential ones, which necessitates that renewable energy sources be used in such buildings as well. The Bill also proposes to increase members in the Governing Council of Bureau of Energy Efficiency, a statutory body constituted under the Ministry of Power.

The passing of the Bill gives “legislative teeth to India’s domestic carbon credits trading market”, said Vaibhav Chaturvedi, Fellow, the Council on Energy, Environment and Water (CEEW), adding that he hoped to see important structural details emerging soon.

“Carbon pricing as an instrument will be critical for India to achieve its net-zero target and this has been a bold and ambitious move by the Government of India,” he said. “CEEW’s industry engagement shows that India’s industry stakeholders do not have deep experience of the cap and trade market. The next step should be to train industry participants on the operational aspects of the market to ensure success of this intervention and institutionalise it in the Indian ecosystem.”

Some concerns emerge

While most Members of the Parliament supported the legislation, some raised concerns on several aspects including the carbon trading scheme, why it came under the ambit of the power ministry and not the environment ministry, and the lack of a better structure to both regulate and implement the carbon credit system.

CPI(M) MP V. Sivadasan said the Bill was yet another example of the Centre taking away the rights of States, reported The Hindu. “The Bill proposes only five representatives of the States and it means that a majority of the States would not be able to register their opinion in the Bureau of Energy Efficiency. The Central Government is curtailing the rights of the States. Each and every State has the right to register its opinion. So, that should be protected,” he said. Others including Binoy Viswam of the CPI urged the government to refer the bill to a parliamentary panel to make several improvements.