Key Features of PAT and Emissions Trading
PAT (Perform, Achieve, and Trade)
Focus: Targets energy efficiency in industries.
Mechanism: Firms must meet energy efficiency standards and can trade excess energy savings.
Regulation: No cap on total energy used, only relative efficiency is regulated.
Emissions Trading (Cap and Trade)
Focus: Controls total emissions by setting absolute caps.
Mechanism: Polluters receive emissions allowances and can trade them.
Reductions are achieved by capping overall emissions.
Regulation: Strict limits on total emissions, with financial incentives for cutting emissions.
What is a Carbon Market?
A system where carbon credits are traded to offset emissions.
It can involve buying and selling allowances for emitting carbon dioxide or equivalent gases.
Aims to reduce overall greenhouse gas emissions by creating a financial incentive to cut emissions.
Types:
Voluntary Markets: Companies or individuals buy credits to offset their emissions voluntarily.
Compliance Markets: Required by regulations, where companies must meet mandatory emission reduction targets.
Challenges Faced by India in Transitioning to a Carbon Market
Balancing climate goals with economic development and industrial needs, particularly in sectors like iron and steel.
Creating a carbon market that aligns with India's Nationally Determined Contributions (NDCs) without conflicting with existing development priorities.
Transitioning from PAT to a carbon market requires significant changes in regulations and industry practices.
India needs to design a carbon market that fits its unique context, differing from systems like the EU Emissions Trading System (ETS).
Developing infrastructure for emissions measurement and trading, including setting up domestic carbon credit trading mechanisms.
Addressing potential economic impacts on industries and ensuring that carbon market policies do not adversely affect growth or lead to increased costs.
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