India Introduces New Carbon Credit Rules to Promote Cleaner Energy Sources

Rashi runs a cement factory. Every year, this factory emits 7.3 lakh tonnes of carbon dioxide. According to the new rules, this must be reduced to 5.8 lakh tonnes by 2030.

If the company does not meet this target, it must buy 1.5 lakh carbon credits. At ₹950 per credit, that’s ₹14.25 crore out of pocket.

These are not just some random numbers; these numbers affect real businesses.

The new system of carbon credits is no longer a voluntary choice, especially for industries that release high emissions. 

The system is designed to encourage companies to cut pollution and invest in cleaner energy sources. Failure to adjust to the new system could cost your business heavily.

What Is A Carbon Credit?

One carbon credit gives a company the right to release one tonne of carbon dioxide or a similar gas. You can sell your leftover credits if your business pollutes less than its allowed limit. 

On the other hand, if your business pollutes more, you need to purchase extra credits to make up the difference. This sets up a financial incentive for your company to reduce emissions.

Before, trading of carbon was optional. However, now it has become mandatory for large sectors. 

Sector-Specific Emission Targets

Each primary sector now has a clear target to reduce emissions by 2030. Such goals will help lower the carbon intensity of production.

The following are the 2030 targets for emissions for major sectors:

Nishit owns a steel company that produces 10 lakh tonnes of output. It must reduce its emissions from 23 lakh tonnes to 19 lakh tonnes by 2030.

If he fails, he will have to purchase 4 lakh credits, costing ₹38 crore.

Old Market Vs New System

The above-mentioned changes make it clear that companies must now constantly track, reduce, and report emissions.

What Happens If A Company Exceeds Limits?

If your company goes above the allowed emissions then you need to buy credits from those that emit less.

Renewable Projects Get More Value

Now, clean energy is receiving better pricing for its credits. It encourages more projects in such areas. 

That drop can be traded for significant value if your solar project reduces 20,000 tonnes of emissions. You can easily earn ₹2.3 crore by selling credits.

Tracking And Verification

A central carbon registry keeps records of each credit. This registry ensures that each credit is real, verified, and not double-counted.

The process of carbon credit is:

Real-World Scenario: Small Cement Plant

Suppose your cement plant produces an output of 10 lakh tonnes. At 0.73 tonnes of CO₂ per tonne, its emissions are 7.3 lakh tonnes. This has to be brought down to 5.8 lakh tonnes.

If you fail to lower its emissions, then:

• You need to purchase carbon credits worth 1.5 lakh.
• At ₹950 per credit, that’s ₹14.25 crore in extra cost.

By improving your equipment and lowering emissions:

• You can easily ignore a penalty worth ₹14.25 crore.
• Also, you can earn more by selling unused credits.

Final Thoughts

You might have understood by now that new rules have made it costly to pollute and rewarding to clean up. 

You might think that the investment cost for clean energy is high, but it leads to savings, earnings, and better compliance.

If you are not adapting then you might face the risk of higher costs, damaging the brand, and legal issues.

Those who are willing to make changes now will lead the market in cleaner operations and cost savings. 

FAQs

1. What is one carbon credit?

It is the permission to emit one tonne of carbon dioxide.

2. When will new rules apply?

It will start in 2026 for large polluting sectors.

3. Who will check emission numbers?

It will be verified by third-party agencies and authorities of the government.

4. What will happen if my firm exceeds emission limits?

You need to buy extra credits or pay fines.

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