The Energy Conservation Amendment Bill 2022 was tabled in the Lok Sabha on August 3, 2022 and passed on August 8. This bill amends the existing Energy Conservation Act 2001 in a number of important ways. The amendment is needed to facilitate India’s broader commitments to climate change and to promote domestic green economy.
Need of the Amendment:
Facilitate the achievement of “Panchamrit”— as five nectar elements presented by India in COP-26 (Conference of Parties -26) in Glasgow 2021
Promote renewable energy and development of domestic Carbon market to battle climate change
Introduce new concepts such as Carbon trading and mandate use of non-fossil sources to ensure faster decarbonisation of Indian economy and help in achieving sustainable development goals in line with the Paris Agreement and various other actions related to climate change
The ‘Panchamrit’ framework as shared by Prime Minister Narendra Modi at COP26 in Glasgow 2021:
India will get its non-fossil energy capacity to 500 gigawatt by 2030
India will meet 50 per cent of its energy requirements till 2030 with renewable energy
India will reduce its projected carbon emission by one billion tonnes by 2030
India will reduce the carbon intensity of its economy by 45 per cent by 2030
India will achieve net zero by 2070
The stated objectives of the amendment are:
Mandate use of non-fossil sources, including Green Hydrogen, Green Ammonia, Biomass and Ethanol for energy and feedstock;
Establish Carbon Markets;
Bring large residential buildings within the fold of Energy Conservation regime;
Enhance the scope of Energy Conservation Building Code;
Amend penalty provisions;
Increase members in the Governing Council of Bureau of Energy Efficiency;
Empower the State Electricity Regulatory Commissions to make regulations for smooth discharge of its functions.
Key Tenets of the Amendment
Renewable Energy Mandates: The Act empowers the central government to specify energy consumption standards and require energy intensive industries to meet a minimum share of energy consumption from non-fossil sources. Basis StepChange’s analysis, the fairly targeted and comprehensive list of these industries means that over 50% of India’s emissions can be directly targeted by this Act.
LIST OF ENERGY INTENSIVE INDUSTRIES AND OTHER ESTABLISHMENTS
Aluminium;
Fertilizers;
Iron and Steel;
Cement;
Pulp and paper;
Chlor Alkali;
Sugar;
Textile;
Chemicals;
Railways;
Port Trust;
Transport Sector (industries and services);
Petrochemical, Gas Crackers, Naphtha Crackers and Petroleum Refineries;
Thermal power stations, hydel power stations, electricity transmission companies and distribution companies;
Commercial buildings or establishments.
Carbon Credit Trading: The Act empowers the central government to specify a carbon credit trading scheme. While the details are expected to emerge over time, the core mechanism seems to be that central government (through an agency) will issues carbon credit certificates to registered entities (which includes but is not limited to all the energy intensive industries) under the scheme to produce a specified amount of carbon emissions. These entities shall be entitled to purchase or sell the carbon credit certificate. It also has a provision for other entities to buy or sell carbon credit certificates on voluntary basis.
💡 Energy Conservation for Buildings: The original Act empowers the central government to specify energy conservation code for commercial buildings. The amendment extends it to include all new residential buildings erected after this notification of the code and having a connected load over 100KW (It also allows states to specify lower thresholds). The Bill further allows BEE more flexibility with specifying the code itself including norms for energy efficiency and conservation, use of renewable energy, and other requirements for green buildings.
Extending Standards to Transportation: Under the original Act, the energy consumption standards applied to equipment and appliances. The Bill expands this to include vehicles and vessels (includes ships and boats). It also empowers the government to prohibit manufacture or import of any equipment, appliance, vehicle or vessel unless it conforms to the specified energy consumption standards.
More Power to Bureau of Energy Efficiency: The Bureau of Energy Efficiency (BEE) has been strengthened to drive the more ambitious agenda of this amendment and its charter and governing body has been updated to reflect this. The Amendment provides for number of members of Governing Council to be increased to between 31 and 37 (from between 20 and 26). In particular, it increases the number of secretaries to 12 and it also provides for up to seven members representing industries and consumers.
Increased Enforcement: The act also provides for much stricter penalties to those not complying with the regulations under the act. This includes penalties up to:
₹ 10 lakh rupees for entities not meeting energy standards. Additional penalties can go up to twice the price of every metric ton of oil equivalent consumed in excess of the prescribed norms
₹ 2000-5000 per appliance or equipment in relation to which the non- compliance has occurred
For a manufacturer of a vehicle who fails to comply with the fuel consumption norms, there is an additional penalty per unit of vehicles sold in the corresponding year: (i) ₹ 25,000 per vehicle for non-compliance of norms up to 0.2 litres per 100 kms ii) ₹ 50,000 per vehicle for non-compliance of norms above 0.2 litres per 100 kms
While the Act empowers the State Electricity Regulatory Commissions (SERCs) to adjudge penalties under the Act. The Bill adds that SERCs may also make regulations for discharging their functions.
So what does this all mean?
Multi-Pronged Focus on Climate Change
The bill in only the latest amongst a coordinated, multi-pronged effort by the government to meet its commitments under the Paris Agreement. To name a few, SEBI has mandated climate disclosures as part of BRSR, it is looking to regulate ESG mutual funds and ESG ratings, RBI is pushing financial institutions to think about climate risk, and now BEE is expected to drive new regulations around carbon markets, use of renewable energy and energy conservation in buildings.
Domestic Green Economy
There is a clear push towards building a strong domestic green economy. While this can be looked as part of the broader Atamnirbhar Bharat push from the central government, there seems to be a sense that the transition to a green economy is a huge development opportunity, one that India can’t afford to loose.
Wide-Ranging Impact
Almost all large organisations will be impacted by this change, whether directly through the energy consumption standards or indirectly through the buildings, equipment & vehicles they use, the power they consume and their supplies they buy from energy intensive industries. Combined with new disclosure requirements from SEBI and
Companies need to Plan for Green Transition
Companies across the spectrum need to start planning for this shift means for them. We believe that companies should not look at this as a peace-meal compliance exercise but rather as a strategic shift that could lead to significant loss or gain in market share and share price. For energy intensive industries this could be existential, for others, highly disruptive to status quo.
Recommendations
While the impact to every sector and company, will be unique, here are some of our general recommendations -
All companies need to start measuring their current emissions, including the emissions embedded in their upstream and downstream supply chains. Companies need to identify risks in their own operations as well as in their supply chain.
Green Buildings will become the norm, rather than the exception. Builders and construction companies need to figure out how to ramp up supply chains for green materials.
Companies that build equipment, appliances, vehicles or vessels will need to start investing in ways to become even more energy efficient.
All energy intensive industries need to have a carbon credit strategy in place.
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Sources https://legislative.gov.in/sites/default/files/A2001-52.pdf http://164.100.47.4/BillsTexts/LSBillTexts/Asintroduced/177_2022_LS_Eng.pdf https://prsindia.org/billtrack/the-energy-conservation-amendment-bill-2022 https://www.climatetrace.org/ StepChange is a climate-tech startup that helps companies and brands accelerate their sustainability journey and transition to NetZero. Learn how we may be able to help your organisation through our website, or simply follow us on LinkedIn to stay tuned! To share this article, use the social icons below: