Saurabh Diddi, director of the Bureau of Energy Efficiency (BEE), the nodal body for designing and implementing India’s carbon markets, is responsible for developing the architecture of India’s carbon credit trading scheme (CCTS), a $50 billion investment opportunity. The scheme, having a mandatory compliance regime and voluntary offset credits, is expected to be operational in 2026. Edited excerpts of an interview with S Dinakar.
Are carbon markets part of India’s future?
They are a significant step for our country. The Energy Conservation Act was amended to develop the CCTS. We notified the CCTS in June 2023, giving us a framework for a compliance mechanism. Then we amended that notification in December 2023, where we included a framework for offset mechanism. Now we are working on a solution that can be implemented. How is the CCTS different from India’s existing carbon-credit schemes? Will it subsume all other schemes? As of now, they will run parallel. “Perform Achieve Trade” (PAT) and the CCTS are similar. In the case of the PAT, you do only energy efficiency. The CCTS includes process-related and energy-related emission. (The PAT is the BEE’s flagship programme to enhance energy efficiency through certification of energy saving.)
Will all PAT sectors come under the CCTS?
We used to cover 13 sectors under the PAT. Of these we are shifting nine to the carbon market. We do not want to close the PAT. Right now we are testing the waters and once it is through, we will think of other sectors, but all sectors may not be shifted.
Can you explain the basic structure of the CCTS? What do you hope to achieve though it?
There is a compliance mechanism for obligated entities by which we give targets in terms of greenhouse gas-emission intensity. Say, if you are producing 1 ton of steel and how much carbon dioxide you are emitting for that.
We have given a (emission intensity) target till 2027. If they emit less than that, they get carbon-credit certificates. In case they do not achieve those levels, they buy credits. This is the compliance mechanism. As of now, we have 700-800 units, which will participate as obligated entities under the compliance regime.
Offsets are a voluntary mechanism. There will be methodologies for the projects to qualify. There will be renewable-energy (RE) methodologies -- for RE with storage, for green hydrogen from electrolysis, and from biomass. Like this, we must have 50-100 methodologies. As of now, we have prepared eight, which are under approval. Offset procedures and methodologies may be published in a couple of months. Last July, we published compliance procedures. Only targets need to be notified.
What is the basis for the targets? Any international benchmarking?
It is purely from an Indian perspective. For example, at what level is the steel sector producing crude steel? From there, we identified various technologies on how you can reduce emission till 2030.
We took whatever feasible technologies there are till 2030, and calculated the marginal abatement cost and how much investment is required. We observed there would be a marginal impact on the cost of each sector because otherwise it will become costly.
What do you expect the average carbon-credit cost for companies? In the European Union (EU), it costs 70 euros a ton.
We can’t say because it is subject to permutations and combinations. Roughly, it is between $8 and $10 a ton worldwide.
Do you think that at some point the government may have to intervene if the price of carbon credits plunges?
We have a market-stability reserve. That is going to help in balancing the market. In case prices go low, the reserve will come into picture.
How were the targets given?
We calculated a product’s emission intensity per ton. It was further calibrated for individual units. The most efficient plant will get the lowest target, and the most inefficient plant will get the highest. If there are 800 units, there will be 800 targets.
And are these targets revised every five years or every three years?
We are notifying them till 2027. But in 2026, we will again notify them till 2030. At that time we look into that trajectory again, whether we are stringent or lenient.
What about verification of credits? Who pays for verification?
We have laid down the procedures for third-party verifiers and how those will be accredited. We will do random checks. We are trying for complete transparency. There will be some transactional fees to fund our portal expenses. Expenses of third-party verifiers will be borne by project developers.
Will you issue free credits like the EU?
 "India's carbon market set for 2026 launch, BEE director reveals")
