Explained: Carbon credits, ‘green’ homes with Energy Conservation Bill

The proposed law aims to strengthen the existing regulatory framework and provide financial powers to states to implement energy conservation schemes

Energy Conservation Bill
The Bill seeks to increase the scope of the Energy Conservation Building Code by bringing residential buildings within the energy conservation regime. Representational image

The Union government introduced the Energy Conservation Bill in Parliament on Wednesday, which is aimed to act as a facilitator to achieve India’s climate change targets. The Bill seeks to increase India’s demand for renewable energy, thereby reducing the nation’s carbon emissions.

What does the Bill seek to bring in?

The Bill mandates the use of non-fossil sources, including green hydrogen, green ammonia, biomass and ethanol for energy sources and feedstock.

Carbon credit trading may soon achieve uniformity in India as the Bill aims to lay down the framework for a National Carbon Market and a carbon credit trading scheme. The domestic market for carbon trading will be based on the “perform, achieve and trade” mechanism, and may be linked with international markets at a later stage. 

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“It is considered necessary to have legal provisions to prescribe minimum consumption of non-fossil energy sources as energy or feedstock by the designated consumers. This will help in reduction of fossil fuel-based energy consumption and resultant carbon emissions to the atmosphere. Similarly, a need is also felt to provide a legal framework for a carbon market with the objective of incentivizing actions for emission reduction leading to increased investments in clean energy and energy efficiency areas, by the private sectors,” the government said in a statement introducing the bill.

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Power and renewable energy minister RK Singh said with the Bill, the government is introducing a carbon market. “It means whoever moves to green energy, carbon credits can be bought from them, and financing green energy will be easier. Our carbon dioxide emissions will go down,” he said.

What does it say on residential buildings?

The Bill aims to strengthen the existing regulatory framework and provide financial powers to states to implement energy conservation schemes. It also seeks to increase the scope of the Energy Conservation Building Code by bringing residential buildings within the energy conservation regime.

Residential buildings consume about 24 per cent of the total electricity in India. With the sector expected to add 3 billion sq m by 2030, power demand is slated to skyrocket. The Bill says that the additional cost of 3-5 per cent for buildings will be recovered within 4-5 years through savings on energy costs.

It further says states will have powers to reduce the size of residential buildings covered under the definition of the Act, and the Centre will have the powers to issue carbon credit certificates to registered entities. 

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Penalties for not complying with building codes will be administered via building bylaws. Individual dwellings are to be excluded for now, but with a load requirement of 100 KW or more, group housing societies and multi-storey buildings will be included under the scope.

What about non-compliance?

Only designated consumers have been mandated to appoint energy managers, which exempts small units from any extra burden. 

Non-compliance with can lead to a penalty of up to Rs 10 lakh, while extended failures in compliance can lead to penalties up to Rs 10,000 per day. 

The Bill proposes a penalty of up to twice the price of a metric tonne of oil used in excess by a non-compliant industrial unit or vessel. It intends to penalise vehicle manufacturers for every sold vehicle which fails to comply with fuel consumption norms.

Is any existing law being amended? 

The new Bill proposes to amend the Electricity Conservation Act, 2001, last amended in 2010, to introduce changes such as incentivising the use of clean energy by issuing carbon saving certificates. 

India enacted the Energy Conservation Act, 2001 which has at its core efficient use of energy and its conservation. This Act made way for establishment and incorporation of the Bureau of Energy Efficiency. The act was subsequently amended in 2010 to address various new factors which emerged with the development of the energy market.

What has been the response?

Green energy experts have welcomed the bill, stating that investment in clean technology will help corporates in greening their business profiles and get an additional revenue stream from the attached carbon credits.

While the finer details are yet to be examined, most stakeholders agree that the new law is needed for India to carry out its commitments made at the global COP26 energy summit last year.

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