PAT on the Back for India

India advances in the low carbon economy with energy efficiency savings trading and a carbon tax on coal.

India made headlines recently when it released its emissions inventory for 2007 [PDF], documenting a rise in emissions of 2.9% annually since 1994, and yet, a total annual amount still less than a third of the emissions from China or the U.S. Another piece of news came with less media reporting, although it was also very significant. On June 30, 2010, the Government of India announced a suite of ambitious domestic policies (see India: Taking on Climate Change [PDF]) to reduce emissions, promote clean energy, monitor climate impacts and direct the country onto a low-carbon path.

Two of these measures are particularly relevant in the U.S. The first is the so-called PAT (Perform, Achieve & Trade) Mechanism for Energy Efficiency. This policy is very interesting because it combines performance standards with allowance trading. Around 700 of the highest energy intensive industries and power plants, accounting for more than 50% of fossil fuel use, will be mandated to reduce energy consumption. The requirements will vary depending on the current level of efficiency: the most inefficient facilities would have to reduce their energy use by a higher amount. The trading part comes as a bonus for those facilities that manage to go beyond their required energy savings.

These facilities will be issued “Energy Savings Certificates” for those excess savings, which they can then trade with other industries that are having difficulties meeting their target, making the scheme cost-effective. The government expects a 5% reduction in energy consumption and emission reductions of 25 million tons per year by 2015. An Indian news Web site (The Hindu Business Line) provides more information about PAT in "India Inc may soon be trading energy-saving certificates" (25 Jan 2010). According to Tirthankar Mandal, Climate Policy Program Coordinator at WWF India, the government is likely to launch the PAT scheme very soon.

Earth Hour 2010. Before and after the lights were switched off at the India Gate, New Delhi, India. © WWF/Thangavelu

The second measure is a Carbon Tax on Coal to Fund Clean Energy. With a $1 levy per metric ton of coal, the government expects to raise around $500 million this fiscal year, devoting the money to a National Clean Energy Fund for research and development of clean energy technologies. The coal levy equates to taxing CO₂ emissions by around $0.35 - $0.54 per metric ton, depending on the emissions factors from different types of coal. Although this is a relatively small tax, it starts to put a price on carbon and make polluting industries pay part of the investments needed for clean energy.

India realizes that a price of carbon and emissions trading are necessary to drive the country to a low carbon future and to account for the indirect costs of fossil fuel use, like the health impacts of pollution in cities and the climate change impacts on coastlines and agriculture. These are initial steps, as India also needs substantial resources for climate adaptation. However, if a country with still hundreds of millions of people in poverty can afford to put a price on carbon, certainly the U.S. can. This is yet another sign that many countries are moving ahead of the U.S. in the race to a clean energy economy, by implementing national level policies that achieve emissions reductions, devote resources towards clean energy and stimulate the creation of green jobs.

Online Resources:

India: Greenhouse Gas Emissions 2007.  Executive Summary [PDF].  Ministry of Environment and Forest, Government of India.  May 2010.

India: Taking on Climate Change [PDF].  "Post-Copenhagen Domestic Actions."  From the Ministry of Environment and Forest, Government of India, June 30 2010.

Sierra Club India Environment Post: Polluters Pay. Sierra Club. August 13 2010.

Visit WWF India’s page on Climate Change