NEW DELHI: India will have the world's first market for trading in energy savings. Under the National Action Plan on Climate Change, the power
ministry has prepared the blueprint for trading in energy by industrial plants that save energy beyond the targets set for them.
Under the plan, formulated by the Bureau of Energy Efficiency (BEE) under the National Mission on Enhanced Energy Efficiency and earlier announced in principle by the PM's climate change council, the government will set mandatory targets to be achieved by each large industrial unit and plant in energy intensive sectors, which include cement, aluminium, steel, power, textiles, fertilizers, railway, paper and pulp industries. The plan, which is to be brought soon before the PM's climate council for the final approval, will set in place the first such open market in the world for energy savings.
Under the global compact on climate change under UN aegis, there exists an international trade in greenhouse gas emission reductions.
But India, which has extremely low emissions as compared to the industrialized countries, has taken the stand that the only steps it needs to take, that too domestically, is to further strengthen its energy security which will automatically bring co-benefits of reduction in the global warming causing emissions.
Named the 'Perform, Achieve and Trade' or PAT scheme, energy reduction targets would be set in terms of the 'specific energy consumption' for each plant individually to ensure that there are no blanket benchmarks that create an uneven turf for different sizes and type of players.
While the methodology for ascertaining the energy consumption in each identified sector has been finalized, it will take a year to ascertain the target for each large unit.
Once the targets are set by end of 2009, the industry will be given three years to achieve them. Those units that surpass their targets will be provided 'energy certificates'. These certificates will be tradable on the existing power exchanges in the country. Companies that fail to meet the targets set for them will have to buy these certificates under an open market mechanism.
If the failed units do not meet their target either by achieving energy savings or by buying the energy certificates, they would be penalized by the government under the Energy Conservation Act.
Under the plan, BEE will accredit private agencies to audit the actual energy consumed by the industrial units and retain the powers to carry out random checks.