Monetizing Emission

With the Kyoto Protocol and its associated emission trading norms on the international discourse after the just concluded annual IPCC (Inter-government Panel on Climate Change) 17^th meet in Durban, India has developed a new and its own trading protocol. India being the 3^rd largest emitter of carbon-dioxide, these norms will have far reaching consequences for the international trading as far as the Certified Emission Trading is concerned.

Growth has been one of the major drivers of rise in demand for energy in the country, in particular led by energy-intensive industries such as iron & steel, cement, fertilizers. These energy-intensive industries account for over 45% of the commercial energy use in India, to deliver 25% of National GDP, as per the estimates of BEE (Bureau of Energy Efficiency). The energy demand of these industries is primarily met by fossil fuels and therefore is highly vulnerable to availability and price volatility of energy resources.

According to an assessment by World Bank, Indian industry has seen greater energy efficiency improvement since the late 1980s than any other sector of the economy. Some of the reasons for this are the rise in competition following liberalization, high energy prices and enactment of the Energy Conservation Act, 2001.

The National Energy Conservation Awards given to industries every year on the National Energy Conservation Day (14^th December) by the Ministry of Power indicate that the payback on investments is 1.3 to 3 years for energy efficient technology.

Carbon Credits

• The “Perform Achieve & Trade” (PAT) mechanism, which is the flagship program of the National Mission for Enhanced Energy Efficiency (NMEEE), is intended to stimulate energy efficiency investments that would enable industries to save at the minimum 5% of their energy cost, estimated at 9.8 million tonnes of oil equivalent. This would translate into an annual cost reduction of over Rs. 30,000 Crore at current oil prices, thereby enhancing their global competitiveness, in addition to achieving savings to the national exchequer as well as reducing India’s overall GHG emissions.

• The PAT scheme and NMEEE are the integral part of the National Action Plan on Climate Change (NAPCC) which was released by the Prime Minister in June 2008.

• PAT scheme, which will be the first-of-its-kind initiative in the developing world, is a market based mechanism to make improvements in energy efficiency in energy-intensive large industries attractive.

• The scheme builds on the provision of the Energy Conservation Act that empowers Central Government to notify energy-intensive industries and mandate them to report their energy usage, appoint Energy Managers and adhere to targets for energy efficiency.

Efficiency Targets

The PAT energy efficiency targets, measured in terms of reduction in their Specific Energy Consumption (SEC), will provide the industry an Energy Saving Certificate (ESCerts) which it can sell to another industry having mandatory target but unable to meet it. ESCerts so purchased would be deemed to be in fulfillment of compliance requirement for the underachievers and avoid the penalty for non-compliance under the Act. The sale and purchase of ESCerts has been given legal sanctity by amending the Energy Conservation Act.

The first commitment period for PAT is likely to commence in 2012 and will run for 3 years. The mechanism could help save the industry about 10 million tonnes of oil equivalent in fuel savings, equivalent to over 5,600 MW of avoided capacity addition.