CERC Proposes New Regulations On Carbon Credit Trading

CERC Proposes New Regulations On Carbon Credit Trading

The Central Electricity Regulatory Commission (CERC) has proposed new rules for trading carbon credits in India, aiming to create a straightforward and controlled marketplace. These draft regulations, titled “Central Electricity Regulatory Commission (Terms and Conditions for Purchase and Sale of Carbon Credit Certificates) Regulations, 2024,” provide a framework for companies and organizations to buy and sell Carbon Credit Certificates (CCCs) on recognized power exchanges.

These draft guidelines apply both to “Obligated Entities,” which are required to buy carbon credits and to “Non-Obligated Entities” that may choose to participate. Under these regulations, certain roles and processes have been defined to keep the market organized. For instance, the Bureau of Energy Efficiency (BEE) will serve as the “Administrator,” overseeing the market and helping to enforce rules. The Grid Controller of India will manage the registry, which will act as a database for all CCC transactions.

This setup is designed to ensure that the carbon credit market runs smoothly, with clear rules and reliable oversight. The purpose of these new regulations is to establish a structured marketplace for carbon credits where buyers and sellers can trade CCCs in a transparent way. All trades will happen on power exchanges that are approved by the CERC. Within these exchanges, the carbon credit market will have two sections: one for companies that must buy CCCs to meet regulatory requirements (Compliance Market) and one for voluntary participants (Offset Market). This arrangement is intended to keep trading efficient and organized.

To determine the price of carbon credits, the exchanges will use a bidding system. This process will be guided by a price range set by the CERC, including a minimum “floor price” and a maximum “forbearance price.” This method is intended to ensure fair pricing without major price swings. The BEE will supervise the market to make sure trading is transparent and follows the rules. They will also work closely with power exchanges to watch for any rule-breaking. Companies that break the rules three times in a quarter could be barred from trading for six months. The CERC is seeking feedback on this draft from the public before finalizing the regulations.