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Carbon pricing: A game changer for industry from Paris

Nearly 200 countries on Saturday agreed to a global carbon pricing mechanism that will provide market-led framework to collectively reduce emissions and give boost to energy-intensive industry to adopt greener technologies.

world Updated: Dec 14, 2015 07:30 IST
Chetan Chauhan
French President Francois Hollande (R) shakes hands with UN secretary general Ban Ki-moon next to French foreign minister and COP21 president Laurent Fabius (L) during the final session of the COP21 United Nations climate change conference in Le Bourget near Paris on Saturday.
French President Francois Hollande (R) shakes hands with UN secretary general Ban Ki-moon next to French foreign minister and COP21 president Laurent Fabius (L) during the final session of the COP21 United Nations climate change conference in Le Bourget near Paris on Saturday.(AFP)

Nearly 200 countries on Saturday agreed to a global carbon pricing mechanism that will provide market-led framework to collectively reduce emissions and give boost to energy-intensive industry to adopt greener technologies.

Under the new mechanism, all carbon exchanges will be inter-connected, enabling holders of carbon credits to trade it internationally. For instance, a company in Delhi will be able to trade credit, earned for saving emissions, in Europe or United States.

India already has a domestic carbon exchange through the cap and trade mechanism called Perform, Achieve and Trade (PAT) for some of the most polluting sectors, such as iron and steel and cement. China set up its domestic carbon exchange in 2014.

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In this, the government sets an emission reduction target for each sector on an annual basis, with industry bodies having to provide a goal for each company. The companies that achieve their targets to reduce emissions can trade the credit (equivalent to a tonne of carbon saved) with ones that fail to meet their emission reduction goal, thereby ensuring all become a part of low carbon growth pathway.

Ajay Mathur, director general of the Bureau of Energy Efficiency, recently told HT that not adopting cleaner technologies under PAT was a disincentive for industries as it would make their production unviable for competition in the open market.

Companies from Maharashtra to Gujarat have found that the cost of adopting energy efficiency technologies can be recovered in less than three years through savings in energy bills. Mathur said savings of more than 10,000 MW were achieved in 2014 through PAT – this will improve as the global mechanism will provide better prices for carbon credits.

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