Federation of Indian Petroleum Industry (FIPI), in association with S&P Global as knowledge partner, organised a webinar on ‘Carbon markets’ on 18th October, 2023. The webinar was conducted to delve into the fundamentals of carbon markets, exploring carbon credits and allowances while distinguishing between Voluntary and Compliance markets. The webinar gave an insight about India's proposed carbon market model (ICM) as well as Carbon Border Adjustment Mechanism (CBAM) and its potential implications on Economically Important Trade-Exposed (EITE) economies, including India's oil and gas sector. The webinar witnessed an overwhelming response with participation of more than 200 professionals working across the oil and gas value chain.
Mr. DLN Sastri, Director (Oil Refining & Marketing), FIPI began the session with the opening remarks. He spoke about the series of measures taken by Government of India to enhance energy security and improve efficiency in use of energy for inclusive growth and sustainable development. He said that in case of carbon markets, while they intend to facilitate the emission targets and support the sustainable projects, they also face several challenges viz, need for harmonised standards, verification and monitoring challenges, price volatility and uncertainty, lack of standardisation in project types etc. He mentioned that as a step towards environment sustainability, the green credit programme was announced by the Government of India, aligning with India’s climate goals under the Paris Agreement. Further, he talked about the notification on Carbon Credit and Trading Scheme published in June 2023, which is anticipated to create a whole system of mechanisms that would govern the Indian carbon and greenhouse gas emissions scenario in the coming few years.
Ms. Marie-Louise du Bois, Global Head of Carbon Pricing at S&P Global Commodity Insights, talked about the need for carbon pricing and stressed the relevance of these prices to have standardisation that helps in setting benchmarks which can be widely used as a reference point by buyers, sellers, or traders. She talked about the pricing methodology and the workflow adopted by Platts which includes - from gathering the required information from a cross- section of market participants to discuss the activity in terms of bid, offers and trades - to their team reviewing the market information to assess market value at a specified point of time. She mentioned that Platts publishes and regularly reviews detailed methodology for each of the markets it covers and at the same time ensures market transparency within the system.
Ms. Agamoni Ghosh, Managing Editor for Global Compliance Carbon Markets at S&P Global Commodity Insights talked about Voluntary Credit Markets (VCM) which is the international VCM market where project-based credit is traded and is driven by methodologies that are overseeing by private standards like Verra and Gold Std. She also talked about the Compliance Credit Markets (CCM) that are authorised markets which could be defined by a region, country, or city and these are driven by methodology standards that could be an authorised approved entity or a government. She then talked about the Article 6 markets that are the Paris agreement credits which are futuristic credits which are yet to be generated as of now. She then elaborated on the difference between carbon allowance and carbon credit. While carbon allowance is a permit to emit in future, carbon credit is a certificate awarded for a proactive initiative which reduces or removes emissions.
She mentioned about the major compliance carbon pricing schemes that are prevalent globally viz- UK ETS, EU ETS, National ETS in China, New Zealand ETS etc. She then specifically talked about India emissions trajectory and said that India would witness peak in its fossil fuel emissions in 2045. She explained the baseline and credit approach which will be implemented in India in 2026. According to this approach, a baseline is set for a specific facility or an industry and if the emissions are below the baseline, credits can be generated while if the emissions are above the baseline, then credit will need to be bought at a particular market traded price. Therefore, she stressed the need for various ministries to determine and set the baselines for various industries in India.
Lastly, she talked about Carbon Border Adjustment Mechanism (CBAM) that is basically EU Commission’s plan to equalize the carbon cost of businesses outside of EU with what businesses pay within EU. This means that any imports that come into EU for certain sectors would be charged a carbon levy. The main aim of this policy is to protect the interest of the domestic producers. She talked about the various countries that are trade exposed in terms of the sectors that are importing into the EU- mainly, from Canada, South Africa, Brazil, Turkey, India etc and about the iron and steel sector which is by far the biggest sector targeted.
The presentations were followed by a Q&A session wherein various queries posted by participants were well addressed by panellists.
Lastly, Mr. Vivekanand, Director (Finance, Taxation & Legal), FIPI in his vote of thanks, complimented the S&P Global team for making a comprehensive presentation on varied topics viz- voluntary and compliance markets, pricing methodology, carbon allowances, carbon pricing mechanism in various geographies, India’s carbon pricing scheme, CBAM and Article 6. He said that as environment is a critical issue globally, the role of carbon credit becomes a valuable tool in the global fight against climate change. He said that India’s carbon credit scheme is going to play a vital role in this regard. He thanked the participants from the energy industry for their active and interactive participation during the event.