Dear Reader, 

The 21st edition of the Spotlight brings to you the analysis of The Energy Conservation (Amendment) Bill 2022. In this edition, we focus upon the policy level interventions introduced through this bill; which may or may not have been necessary for creating a significant impact in promoting energy conservation.

We look forward to hearing your comments and suggestions!

The Energy Conservation (Amendment) Bill 2022
Is it progressive or just a scope-widening exercise?

The Lok Sabha passed The Energy Conservation (Amendment) Bill 2022 on August 08, 2022, without many deliberations. The Bill was introduced as a second amendment (first amendment in 2010) to The Energy Conservation Act 2001. It seeks to:

  • Mandate the use of non-fossil sources, including green hydrogen and ammonia, biomass and ethanol for energy and feedstock;
  • Establish carbon trading markets;
  • Bring large residential buildings under the ambit of the energy conservation regime;
  • Enhance the scope of the Energy Conservation Building Code;
  • Amend penalty provisions;
  • Increase members in the governing council of the Bureau of Energy Efficiency (BEE); and
  • Empower the state regulatory commissions to make regulations to discharge its functions smoothly.

Prima facie, the objectives of the amendment are in line with the Nationally Determined Contributions (NDC). But compliance is the key. In the past, several similar mechanisms, such as Renewable Purchase Obligations (RPOs), Perform Achieve & Trade (PAT), Renewable Energy Certificates (RECs), Demand Side Management (DSM) Regulations, Energy Conservation Building Code (ECBC) etc. have been driving the electricity regulatory framework. None have performed as projected, except REC and RPOs.
From 2025 onwards, the European Union will levy an additional tax on goods imported from countries with no existing carbon reduction mechanism. India is one of the largest exporters of steel in the world. Perhaps ensuring the export of steel and other metals – a carbon-intensive industry, was the motivation behind reframing and renaming energy efficiency trading mechanisms into carbon markets.
Under the carbon market mechanism, each industry supposedly will have an upper ceiling of carbon emissions based on the type of goods produced. Suppose the carbon emissions are below this ceiling. In that case, a certificate with a monetary value based on the carbon reduction will be issued to the manufacturer, which can be traded through a designated external agency. The same applies to an industry releasing more carbon into the atmosphere than the norm; it would have to buy carbon credits following the extra emissions.
This is not something new. The same mechanisms already exist for renewable energy – REC and energy consumption reduction – PAT but did not flourish. What will make the carbon credit market a success hinges on the ability of the industry to reduce emissions and not pass on the cost of buying carbon credits to the end consumer. Additionally, a stricter compliance mechanism is essential to ensure significant carbon reductions rather than being limited to trading carbon credits and the market remaining within domestic premises.
The provision for state regulatory commissions to issue regulations under the new Act will empower the regulator by increasing its stakes in the energy conservation framework. This will also bring some confidence among stakeholders regarding accountability at the execution level.
The bill proposes for increase the number of governing council members of BEE from 20-31 (not exceeding 37) with the inclusion of former secretaries from different departments. These include Environment, Housing and Urban Affairs, Road and Transport, Steel, Civil Aviation, Ports, Shipping and Waterways, Railways etc. It is a good move and would bring different perspectives to the table. Because the working scope of BEE will extend further as carbon markets develop, having members from various fields would ensure the prospect of having a holistic approach in developing regulations for this market. It would still have been even more efficient approach to include environment experts and industry players from the private sector within the governing council to gauge each underlying agenda through different glasses.
The bill has also amended the definition of The Energy Conservation Code as the Energy Conservation and Sustainable Building Code. The ECBC compliance will now include large residential (with a contract load >100 kW) and commercial buildings. This is significant as residential buildings constitute more greenhouse gas (GHG) emissions than commercial ones. Again, the impetus would be on compliance. The ECBC regulations were adopted in 2007 and later amended in 2017, but the compliance factor is still negligible or limited to a few urban pockets. Policymakers must ensure that the sector is not overburdened with regulations without any single one being adequately implemented.
The penalty provision of INR25,000 (up to 0.2 litres per 100 km) and INR50,000 (above 0.2 litres per 100 km) for non-compliance with fuel consumption norms can only be expected to deliver a slap on the wrist of the manufacturer rather than an intervention that could lead to some developmental changes.
Other amendments regarding appropriate name usage of "BEE", bilateral trade of energy saving or carbon credit certificate voluntarily, dedicated funds for the promotion of efficient use of energy and conservation, empowering BEE to make regulations, state government to make rules for providing fee for designated agency form promoting the efficient use of energy etc. are all run of the mill components.
The data on the state energy conservation fund from different states of India would be enough to highlight the inefficiency of nodal agencies, mostly power distribution companies, in adequately utilising these funds. Propelling them towards more similar exercises would not yield a better result. It is high time that our policies are farsighted and straightforward in structure with strict compliance norms and fewer regulatory cobwebs.