Introduction
The Energy Conservation (Amendment) Act, 2022 was enforced on January 1, 2023 with an aim to amend the Energy Conservation Act, 2001. The Energy Conservation (Amendment) Bill, 2022 was introduced in the Lok Sabha on August 03, 2022 and it was passed on August 8. Thereafter, it was passed in the Rajya Sabha on December 12, 2022, and finally got the presidential assent on December 19, 2022. The Amendment Act enables the achievement of Panchamrit—the five nectar elements depicted by India at COP-26 (Conference of Parties-26) that was held in Glasgow in 2021. This will be done by promoting new and renewable energy and the National Green Hydrogen Mission.
Main Provisions of the Act
Some of the important provisions of the Energy Conservation (Amendment) Act, 2022 are explained below:
- The 2022 Amendment Act lays emphasis on promoting renewable energy and establishing the carbon market in India so as to deal with climate change. New concepts have been initiated like carbon trading. Using non-fossil fuels has become mandatory so that decarbonisation can be accelerated and sustainable development goals can be achieved in accordance with the Paris Agreement and other related measures to tackle climate change.
- Ships and other vehicles may have to consume energy as per the standards specified for them.
- As per the Amendment Act, there will be the Energy Conservation Code applicable to buildings, including office and residential buildings (i) having a minimum 100 kW of connected load, (ii) erected after notifying about the Code, or (iii) having contract load of 120 Kilovolt-Ampere (kVA).
According to the 2001 Act, energy consumption standards are prescribed by the code with respect to area. This is amended by stating an ‘Energy Conservation and Sustainable Building Code.’ Under this code, there will be criteria for using renewable energy, energy efficiency and conservation, and other prerequisites for green buildings. Besides, the Amendment Act authorises the state government to reduce the load limits.
- The central government is authorised to frame a scheme for carbon credit trading, which focuses on curbing greenhouse gas (GHG) emission, and thus, dealing with climate change. (Carbon credit refers to a reasonable limit to which a particular amount of carbon dioxide or other greenhouse gases, such as methane or nitrous oxide can be emitted.) All the entities that are registered with the scheme and comply with it may receive carbon credit certificates from the Centre or any other authorised agency. That is, when the emissions are reduced for a given activity or forestry is carried out for carbon absorption, the certificates are earned. These entities may even trade the certificates. An entity that emits harmful gases beyond the prescribed limit may buy the carbon credit certificate. A carbon credit certificate can also be bought by some other persons voluntarily.
- The central government is empowered to determine standards for energy consumption. Under the 2022 Amendment Act, some designated consumers will be required by the government to fulfil the minimum level of energy consumption using non-fossil fuels. There will be varied consumption limits for different categories of consumers and different non-fossil sources. Designated consumers include
- transport sector including railways;
- mining, steel, textile, cement, chemicals, petrochemicals, and other such industries; and
- commercial buildings, mentioned in the schedule.
If this obligation is not fulfilled, a penalty of up to Rs 10 lakh is imposed as a punishment. Besides, a penalty of up to twice the price of oil equal to the energy consumption more than the prescribed limit is imposed.
- As per the Amendment Act, the standards for energy consumption are specified for
- appliances and equipment that use, produce, supply or transmit energy.
- vehicles, as specified under the Motor Vehicles Act, 1988.
- vessels, such as ships and boats.
- buildings, industrial units, and establishments.
If any of the above-mentioned agents do not abide by the standards, a penalty of up to Rs 10 lakh will be imposed on their owners. However, if vessels are non-compliant, an additional penalty will be imposed, i.e., up to twice the price of oil equal to the energy consumption done more than the prescribed limit. If the manufacturers of vehicles violate the norms of fuel consumption, a penalty of up to Rs 50,000 per unit of vehicles sold may be imposed on them.
- As per the Act of 2001, the Bureau of Energy Efficiency (BEE) is established. There is a governing council for the bureau consisting of 20–26 members. These members may be
- representatives of regulatory authorities, such as the Bureau of Indian Standards and the Central Electricity Authority;
- secretaries of six departments; and
- up to four members who represent industries and consumers.
The 2022 Amendment Act states that the council will consist of 31–37 members. Besides, the number of secretaries has been increased to 12. Further, the number of members representing industries and consumers would be increased to seven.
Key Issues and Analysis
Some of the major issues and their analysis regarding the 2022 Amendment Act are described below:
- A scheme of carbon credit trading is meant to curb carbon emissions, thereby tackling climate change. However, it is unclear if the 2022 Amendment Act should specify the market regulator for carbon credit trading. As a result, confusion will be created, and there will be no authority accountable for this.
Usually, the sectoral regulators monitor their respective trading platforms, such as electricity trading is monitored by the Central Electricity Regulatory Commission (CERC). The various Acts specify their respective regulating entities for trading. But the 2022 Amendment Act does not give any provisions regarding the trading of carbon credit certificates.
It is to be noted that though energy savings certificates are provided under the Energy Conservation Act, no regulator has been specified for trading these certificates also. However, the trading of these certificates is done at power exchanges. CERC regulates these exchanges.
- Now, the question arises if it is appropriate that the scheme of carbon credit trading be regulated by the Ministry of Power. According to the Government of India (Allocation of Business) Rules, 1961, the Ministry of Power performs the following functions:
- To frame and implement general policy in the power sector
- To deal with issues regarding energy policy and coordination
- To facilitate energy conservation and energy efficiency related to the power sector
Though the major contributor to GHG emissions in India is the power sector, the carbon credit trading scheme has a wider purview. This is because agricultural activities and industrial processes also significantly contribute to GHG emissions. Besides, changes in land use and forestry absorb greenhouse gases, i.e., they act as a net carbon sink.
As per the Business Allocation Rules, the Ministry of Environment, Forest and Climate Change (MoEFCC) has the responsibility of regulating environmental norms, forestry, and climate change and other related matters. So, the scheme of carbon credit trading should be regulated by this ministry.
- The 2022 Amendment Act does not give a provision whether energy savings, renewable energy, and carbon credit certificates can be interchangeable.
At present, there are two main trading schemes in India that are being implemented—(a) Renewable Energy Certificate under the Electricity Act, 2003, meant for encouraging the use of renewable energy, and (b) Energy Savings Certificate under the Energy Conservation Act, 2001, meant for encouraging energy efficiency.
The above-mentioned activities can be included under the carbon credit trading scheme also. For instance, when a power generation corporation earns a renewable energy certificate by producing renewable energy, it may also help in curbing carbon emissions. Thus, it deserves a carbon credit certificate as well. Likewise, every energy-saving measure helps in curbing carbon emissions by decreasing the need for generating energy. So, it is also entitled to a carbon credit certificate. In the 2022 Amendment Act, it is not mentioned if these certificates are interchangeable.
- The 2022 Amendment Act puts an obligation on the designated consumers to fulfil some portion of their energy needs by using non-fossil sources. However, these consumers may not have many options in these sources considering the low-level competition among distribution companies (discoms) in any region. For example, a commercial place like a hotel in Bengaluru may be obtaining energy from a particular discom in the area. But as per the Amendment Act, this hotel may be obliged to obtain some portion of electricity from non-fossil sources. Often, it has been noticed that the power supply in a region is mostly under the control of one company, i.e., electricity is supplied to all consumers in that region by just one discom. There might not be any other sources of electricity in that region, as the discom determines the energy mix. So, the hotel may not have control over the mix of electricity it has to buy.
Conclusion
The 2022 Amendment Act seeks to assist India in accomplishing its COP-26 commitments (Panchamrits), which are as follows:
- To fulfil 50 per cent of its energy requirements from renewable energy by 2030
- To gain 500 GW non-fossil energy capacity by 2030
- To curb carbon emissions by one billion tonnes by 2030
- To curb economy’s carbon intensity by 45 per cent by 2030 over 2005 levels
- To reach the level of net zero emissions by 2070.
The Government of India is trying to refocus on sustainable development goals so that our future generations are secured. Thus, more reforms may be implemented in the future.
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