The Energy Conservation (Amendment) Bill, 2022

The Energy Conservation (Amendment) Bill, 2022

News: The lower house of the parliament on August 8 passed the Energy Conservation (Amendment) Bill, 2022, which aims to boost clean energy and help in achieving India’s commitments towards climate change.

Objectives for introducing the Bill:
• To ensure that prescribed proportion of energy used by certain industrial, commercial and even residential consumers mandatorily comes from renewable or no-fossil fuel sources.
• To establish a domestic carbon market and facilitate trade in carbon credits. (The carbon market is likely to be on the lines of the European ETS, facilitating the buying and selling of carbon credits.

Key provisions:

Obligation to use non-fossil sources of energy
• The Act empowers the central government to specify energy consumption standards. The Bill adds that the government may require the designated consumers to meet a minimum share of energy consumption from non-fossil sources.
• Designated consumers include industries such as mining, steel, cement, textile. Transport sector including railways and Commercial buildings.
• Failure to meet the obligation for use of energy from non-fossil sources will be punishable with a penalty of up to Rs 10 lakh.

Energy conservation code for buildings
• The bill provides for energy conservation and sustainable building code. This new code will provide norms for energy efficiency and conservation, use of renewable energy, and other requirements for green buildings.

Carbon Markets
• The Bill empowers the central government to specify a carbon credit trading scheme.
• Carbon credit implies a tradeable permit to produce a specified amount of carbon emissions.
• The central government or any authorized agency may issue carbon credit certificates to entities registered under and compliant with the scheme. The entities will be entitled to purchase or sell the certificate.
• Any other person may also purchase a carbon credit certificate on a voluntary basis.

Application to residential buildings
• Under the Act, the energy conservation code applies to commercial buildings - (i) erected after the notification of the code, and (ii) having a minimum connected load of 100 kilo watts (kW) or contract load of 120 kilo volt ampere (kVA).
• The amended bill ensures that new energy conservation and sustainable building code shall also apply to the office and residential buildings meeting the above 2 criteria’s.

Standards for vehicles and vessels
• Energy consumption standards will be specified for motor vehicles, ships and other water vessels.
• The government will be empowered to prohibit the manufacture or import of vehicles and water vessels that do not conform to the prescribed energy standards.

Governing council of BEE
• The bill provides for governing council of members between 31 and 37.
• It increases the number of secretaries to 12. It also provides for up to seven members representing industries and consumers.

What are Carbon markets and how do trade of carbon credits work?
• Carbon markets allow the trade of carbon credits with the overall objective of bringing down emissions.
• These markets create incentives to reduce emissions or improve energy efficiency.
• For example, an industrial unit that outperforms emission standards can gain credits, and unit that is struggling to attain the prescribed standards can buy those credits and show compliance with the standards.
• The unit that did better on the standards earns money by selling credits, while the buying unit is able to fulfil its operating obligations.