Emission Trading Scheme (ETS)

Environment and Ecology Sustainable Development

1333 views

Emission Trading Scheme is part of Kyoto Protocol’s flexibility mechanism which allows companies that have emission units to spare – emissions permitted to them but not “used” – to sell this excess capacity to companies that are over their targets.

How ETS Functions

A cap on the total emissions allowed within the scheme is set, and allowances adding up to the cap are provided to the companies regulated by the scheme.
The companies are required to measure and report their carbon emissions and to hand in one allowance for each tonne they release.
Companies can trade their allowances either privately or over the counter or through spot exchange, providing an incentive for them to reduce their emissions.

Benefits of ETS

Incentivizes efficiency in industries
Promotion of best-practices and awards industries adopting them
Market-based mechanism
Promotes R&D in eco-friendly technology
The success of EU ETS has raised demands of a similar mechanism in India.

Benefits of ETS for India

Will help in reduction in carbon footprint of India at the time when India’s per-capita emission is projected to rise at a very high pace
Incentivize Indian industries to adopt global best practices and will assist in setting-off the cost incurred in doing so
Will promote R&D in eco-friendly technology within the nation, which suffers from economic support
Will help India in achieving its Nationally Determined Contributions under Paris Climate Change Agreement
Reduction of pollution-related health issues in India
Will help in achieving several of SDGs, like Goal 3 (good health and well being), 7 (affordable and clean energy), 11 (sustainable cities and communities) and 13 (climate action).
Will help India emerge as a global leader on climate change issues

Concerns with ETS

ETS allows industries to instead of adopting eco-friendly technology buy emission certificates from other industries
It can put burden on MSME Sector which does not have capacity to shift to new technology as easily as large industries.
A cap on every industry will increase the cost of production for industries and might make them uncompetitive as compared to foreign companies.
ETS will only address one of the aspects of India’s pollution challenge and other issues like crop residue burning and vehicular emissions needs to be addressed

Measures by government like