The proposed process for project development, validation, verification, and issuance of carbon credits in Indian market
In recent years, carbon markets have become a popular mechanism to tackle climate change. The concept is simple: polluters must pay to emit carbon dioxide, and those who reduce their emissions can sell credits to those who are unable to do so. The carbon market creates a financial incentive for businesses to reduce their emissions, and it can potentially drive innovation and promote the development of new low-carbon technologies.
In India, the Bureau of Energy Efficiency (BEE) has proposed a three-phase plan for the development of a national carbon market. Phase 1 focused on establishing the necessary infrastructure and institutional framework for the market, while Phase 2 aimed to increase the supply of carbon credits by validating and verifying emissions reductions. In this article, we will focus on the step-by-step process proposed by BEE for project development, validation, verification, and issuance in Phase 2.
Phase 2 Overview
Phase 2 of the BEE plan focuses on increasing the supply of carbon credits in the market. To achieve this, project developers must register their projects and complete a rigorous process to validate and verify that real, quantifiable emissions reductions have been achieved. Once the project is deemed successful, the regulatory body issues tradeable credits.
The Phase 2 overview, as shown in Figure 11, includes specific activities that participants must complete. A project-specific reference case is established for each activity, which includes a greenhouse gas intensity factor derived from performance benchmarks. For CCS (Carbon Capture and Storage), the reference case will be zero sequestration. Once the project is implemented, the performance of the activity will be monitored, and the respective amount of credits issued by the regulatory body.
The process for project development, validation, verification, and issuance of carbon credits involves the following steps:
Step 1: Project Idea Note
The project developer begins by preparing a Project Idea Note. This early-stage preparation includes generating a project plan, assessing the project’s feasibility, impacts, and risks, and engaging with local stakeholders.
Step 2: Project Design Document
The developer then prepares a more detailed Project Design Document, providing information about the project’s anticipated emissions reductions, plans for quantifying and monitoring the delivery of climate and other social and environmental benefits. The project developer must also demonstrate that the project’s activities exceed “business-as-usual” reductions and avoid emissions leakage.
Step 3: Validation
A third-party auditor validates the project’s plans and assumptions. The auditor verifies that the project’s emissions reductions are real, measurable, and verifiable. The auditor also ensures that the project meets the eligibility criteria for carbon credits.
Step 4: Verification
After the project is implemented and monitored over a period, another audit process called verification assesses the delivery of greenhouse gas mitigation. The auditor verifies that the project has successfully achieved its emissions reduction goals, and that the carbon credits claimed by the project developer are accurate and legitimate.
Step 5: Issuance
Finally, after the project has successfully passed the validation and verification processes, the project developer can begin to issue tradeable carbon credits.
The development of a national carbon market in India is a crucial step towards tackling climate change. BEE’s proposed three-phase plan aims to establish the necessary infrastructure and institutional framework for the market, increase the supply of carbon credits, and ultimately transition to a cap-and-trade system. In Phase 2, project developers must complete a rigorous process to validate and verify their emissions reductions before they can issue tradeable carbon credits. This process involves producing a Project Idea Note, a Project Design Document, validation, verification, and issuance. By following this process, India can ensure the credibility and transparency of its carbon market and create a powerful tool to drive emissions reductions across the country.