The Energy Conservation (Amendment) Bill, 2022

by Dec 27, 2022Energy & Environment0 comments

Both houses of the Parliament of India have approved the Energy Conservation (Amendment) Bill, 2022, with the Rajya Sabha passing it on 12 December, 2022.

The amendment is aimed at providing a timely and futuristic initiative for achieving the targets under its Nationally Determined Contributions1 under the Paris Agreement to address climate change.

Prime Minister Narendra Modi had announced the five elements of India’s climate action – ‘Panchamrit’ at the 26th Conference of Parties (COP 26) in Glasgow whereby he inter alia committed that India would reduce the carbon intensity of its economy by 45% by the year 2030, over the 2005 levels; reduce total projected carbon emissions by one billion tonnes by 2030; and achieve 50% of total installed energy capacity from non-fossil fuel based sources. Considering that a major portion of India’s greenhouse gas emissions come from energy sources, this amendment is expected to ensure decarbonisation of Indian economy through wider utilisation of green energy sources.

The principal legislation, Energy Conservation Act, 2001, was introduced for regulating energy consumption and encouraging energy efficiency and conservation through measures like establishing the Bureau of Energy Efficiency and laying down energy consumption standards for appliances, vehicles, industrial and commercial establishments and buildings. However, considering the global focus on energy transition and role of new energy in climate change mitigation and United Nations Sustainable Development Goals (UN SDGs), this amendment gives statutory recognition to concepts like green hydrogen, green ammonia and carbon credits as important measures for climate change mitigation.

Mentioned below some of the key provisions introduced through this amendment:

Carbon credit trading: The Bill empowers the central government to specify a carbon credit trading scheme. Carbon credit implies a tradeable permit to produce a specified amount of carbon dioxide or other greenhouse emissions. The central government or any authorised agency may issue carbon credit certificates to entities registered and compliant with the scheme. The entities will be entitled to trade the certificates. Any other person may also purchase a carbon credit certificate on a voluntary basis.

Obligation to use non-fossil sources of energy: The Act empowers the central government to specify energy consumption standards. The Bill adds that the government may require designated consumers to meet a minimum share of energy consumption from non-fossil sources. Different consumption thresholds may be specified for different non-fossil sources and consumer categories. Designated consumers include: (i) industries such as mining, steel, cement, textile, chemicals, and petrochemicals, (ii) transport sector including Railways, and (iii) commercial buildings, as specified in the schedule. Failure to meet this obligation will be punishable with a penalty of up to Rs 10 lakh. It will also attract an additional penalty of up to twice the price of oil equivalent to energy consumed above the prescribed norm.

Energy conservation code for buildings: The Act empowers the central government to specify Energy Conservation Code for buildings. The code prescribes energy consumption standards in terms of area. The Bill amends this to provide for an ‘Energy Conservation and Sustainable Building Code’.

This new code will provide norms for energy efficiency and conservation, use of renewable energy, and other requirements for green buildings. Under the Act, the energy conservation code applies to commercial buildings: (i) erected after the notification of the Code, and (ii) having a minimum connected load of 100 kilowatt (kW) or contract load of 120 kilo volt ampere (kVA). Under the Bill, the new Energy Conservation and Sustainable Building Code will also apply to the office and residential buildings meeting the above criteria. The Bill empowers the state governments to lower the load thresholds.

Standards for vehicles and vessels: Under the Act, the energy consumption standards may be specified for equipment and appliances which consume, generate, transmit, or supply energy. The Bill expands the scope to include vehicles (as defined under the Motor Vehicles Act, 1988), and vessels (includes ships and boats). The failure to comply with standards will be punishable with a penalty of up to Rs 10 lakh. Non-compliance in case of vessels will attract an additional penalty of up to twice the price of oil equivalent of energy consumed above the prescribed norm. Vehicle manufacturers in violation of fuel consumption norms will be liable to pay a penalty of up to Rs 50,000 per unit of vehicles sold.

Composition of the governing council of BEE: The Act provides for the setting up of the Bureau of Energy Efficiency (BEE). The Bureau has a governing council with members between 20 and 26 in number. These include: (i) secretaries of six departments, (ii) representatives of regulatory authorities such as the Central Electricity Authority, and the Bureau of Indian Standards, and (iii) up to four members representing industries and consumers. The Bill amends this to provide that the number of members will be between 31 and 37. It increases the number of secretaries to 12. It also provides for up to seven members representing industries and consumers.

However, some analysts have raised some points about the challenges before the Government’s legislation :

Carbon credit trading aims to reduce carbon emissions, and hence, address climate change. The question is whether the Ministry of Power is the appropriate Ministry to regulate this scheme. A further question is whether the market regulator for carbon credit trading should be specified in the Act.

Same activity may be eligible for renewable energy, energy savings, and carbon credit certificates. The Bill does not specify whether these certificates will be interchangeable.

Designated consumers must meet certain non-fossil energy use obligations. Given the limited competition among discoms in any area, consumers may not have a choice in the energy mix.

However, everybody agrees with the context of the amendment as it provides a framework for regulating energy consumption and promoting energy efficiency and energy conservation. Energy efficiency means using less energy to perform the same task. The Act has set up the Bureau of Energy Efficiency to recommend regulations and standards for energy consumption. These apply to appliances, vehicles, industrial and commercial establishments and buildings. Efforts towards energy conservation and efficiency gains are among the key instruments envisaged for climate change mitigation. Efforts on these fronts lower the energy generation requirement, and thereby reduce greenhouse gas emissions. These also have positive implications for energy security in a country like India, which relies on imports to meet some of its energy needs.

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