Both houses of the Parliament of India have approved the Energy Conservation (Amendment) Bill, 2022, with the Rajya Sabha passing it on 12 December, 2022. The amendment is aimed at providing a timely and futuristic initiative for achieving the targets under its Nationally Determined Contributions under the Paris Agreement to address climate change. The Prime Minister of India had announced the five elements of India’s climate action – ‘Panchamrit’ at the 26th Conference of Parties (COP 26) in Glasgow whereby he inter alia committed that India would reduce the carbon intensity of its economy by 45% by the year 2030, over the 2005 levels; reduce total projected carbon emissions by one billion tonnes by 2030; and achieve 50% of total installed energy capacity from non-fossil fuel based sources. Considering that a major portion of India’s greenhouse gas emissions come from energy sources, this amendment is expected to ensure decarbonisation of Indian economy through wider utilisation of green energy sources.
The principal legislation, Energy Conservation Act, 2001, was introduced for regulating energy consumption and encouraging energy efficiency and conservation through measures like establishing Bureau of Energy Efficiency and laying down energy consumption standards for appliances, vehicles, industrial and commercial establishments and buildings. However, considering the global focus on energy transition and role of new energy in climate change mitigation and United Nations Sustainable Development Goals (UN SDGs), this amendment gives statutory recognition to concepts like green hydrogen, green ammonia and carbon credits as important measures for climate change mitigation.
We have mentioned below some of the key provisions introduced through this amendment:
a. Mandated use of non-fossil sources by certain entities
The amendment mandates that ‘designated consumers’ of energy will be required to meet a specific portion of their energy demands from non-fossil sources. Government may also specify different consumption share for different types of non-fossil sources for different designated consumers. Designated consumers currently include specific kinds of industries, transport and commercial buildings.
b. Carbon credit certificates trading scheme
The amendment empowers Union Government to initiate carbon trading scheme to encourage reduction of carbon emissions in the economy. While carbon credit is not defined in the amendment, it is generally considered as a credit provided to an entity for reducing or avoiding specified amount of carbon emissions from its activities. Registered entities will be issued carbon credit certificate by Government of India or its authorised agency under this scheme, which these entities can trade with other entities. Other persons can also voluntarily purchase these certificates. The issuance of these certificates and their trade in the open market is expected to incentivise entities investing in technologies or nature-based solutions to reduce their cumulative energy consumption and hence their carbon emissions.
Mr. RK Singh, Minister of New and Renewable Energy, stated in the Rajya Sabha that Central Electricity Regulatory Commission will be the regulator of this market and prices will be determined by market factors. A governing body will also be established to regulate this scheme comprising of officials and experts from relevant sectors. However, the details of this scheme are awaited.
c. Energy conservation code for large buildings
Mr. RK Singh also stated in the Rajya Sabha that roughly 24% of India’s energy demand comes from building and construction sector. Hence, it is important to encourage energy efficiency and reduce energy consumption in this sector. With this objective, the amendment provides for ‘energy conservation and sustainable building code’ which will be applicable to commercial, office and residential buildings meeting specified criteria. State governments can also specify the lower energy consumption threshold as specified in the Act for their respective jurisdictions. They can also revise, in consultation with the Bureau of Energy Efficiency, this code to suit the regional and local climatic conditions.
d. Energy consumption standards for vehicles
The principal legislation allows the government to specify energy consumption standards for equipment and appliances. For instance, Bureau of Energy Efficiency has notified such standards for electronic appliances. With this amendment, the government can also specify such standards for motor vehicles under the Motor Vehicles Act, 1988 and vessels including boats and ships. This is intended to control energy consumption and emissions from the transport sector.
e. State Energy Conservation Fund
The amendment requires State Governments to constitute energy conservation funds for the promotion of energy efficiency and conservation measures. This fund shall inter alia receive contribution from loans and grants provided by the Union Government and all fees received by the State Government under the principal statute.
This amendment seeks to consolidate multiple sources/aspects related to energy transition, efficiency and conservation under one legislation to avoid overlap and confusion between multiple legislations. It introduces initiatives which are necessary for energy transition and conservation. However, several concerns are being raised by policy experts regarding the scope of this amendment and the implementation challenges for stakeholders including the industry. For instance, industries may not be able to meet the minimum requirements to source their energy needs from non-fossil sources as they may not have control over the source from which power is supplied to them by the power distribution agency. Similarly, there might also be issues related to overlap between the existing policies – Energy Saving Certificates, Renewable Energy Saving Certificates and the new policy – carbon credit certificates trading. It is expected that these aspects and the implementation challenges would be addressed in the near future.
This article was originally published in Mondaq on 21 December 2022 Co-written by: Nawneet Vibhaw, Partner; Himanshu Pabreja, Associate. Click here for original article
Contributed by: Nawneet Vibhaw, Partner; Himanshu Pabreja, Associate
This is intended for general information purposes only. The views and opinions expressed in this article are those of the author/authors and does not necessarily reflect the views of the firm.
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