Emissions Trading Scheme Current Affairs - 2019

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Quick Facts: Emissions Trading Scheme (ETS) of Gujarat

The Gujarat government has launched country’s first ‘Emissions Trading Scheme (ETS)’ which is being described as world’s first market for trading in Particulate Matter (PM) emissions. ETS was launched in Surat ETS) to encourage and incentivize the industrial units to cut air pollution.

Even though trading mechanisms for pollution control do exist in many parts of world but none of them is for PM emissions.

What is Emissions Trading Scheme (ETS)?

It is a regulatory tool that is aimed at reducing the pollution load in an area and at the same time minimising the cost of compliance for the industry. ETS is a market in which traded commodity is particulate matter emissions.

The Gujarat Pollution Control Board (GPCB) sets a cap on total emission load from all industries. Thereby, various industries can buy and sell the ability to emit particulate matter, by trading permits (in kilograms) under this cap and for this reason ETS is also called as a cap-and-trade market.

Functioning of ETS: Under the cap-and-trade market, the GPCB will first define the total mass of pollution that can be released into air over a certain fixed period by all industrial units or factories collectively. This will be equivalent to the cap (or limit) and the permits would then become units which could be bought and sold between traders under the ETS.

Why launched in Surat? Since Surat is a densely-populated industrial centre and textiles and dyeing houses there produce heavy air pollution. Also, industries in Surat had already installed Continuous Emission Monitoring Systems that makes it possible to estimate the mass of PM being released.

Government to set up think tank for oil sector

The Union Government will soon get Cabinet approval for setting up of high-powered think tank under Ministry of Petroleum to look into key issues related to oil and gas sector. Besides, Petroleum Ministry also has send proposal to Union Cabinet for setting up domestic gas trading hub to adopt better mechanism for price discovery of both domestic as well as imported gas.

Internal think tank

The think will give advice on technology, setting up a gas network, attracting more FDI in sector, reducing India’s oil imports by 10%, and developing innovative new models of financing projects. The members of think tank will include ICICI Bank MD and CEO Chanda Kocchar, New Development Bank (NDB) chief K.V. Kamath, former Chairman of 13th Finance Commission Vijay Kelkar, top officials from oil and gas majors from across world and officials from Ministry of Petroleum and Natural Gas.

Domestic gas trading hub

Currently, price of natural gas in country is determined through a government-mandated formula that links the local price to rates prevailing in gas-surplus nations. However, long-term contracts for gas import are linked to crude oil.

 

Domestic gas trading hub will help to move gradually towards transparent price mechanism determined through gas trading hub. It will help to reaffirming India’s resolve to cut carbon intensity of its GDP and increase gas use in energy mix to 15% from the current 6.5% where India lacks much behind world average of gas use in total energy consumption 24%.

Background

India imports almost 60% of its petroleum requirements. Currently, price of natural gas in country is determined through government-mandated formula that links local price to rates prevailing in gas-surplus nations. However, long-term contracts for import of gas are linked to crude oil.

India is planning to shift towards gas-based economy, reduce greenhouse emissions and cut oil import. Governing is doubling its network of pipelines to transport natural gas to 30,000 km within next three-four years for shifting to gas-based economy.