Stabilisation Fund

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    In Context 

    India is planning a stabilisation fund to keep prices of credits in its planned carbon market above a certain threshold, ensuring that they remain attractive for investors and that the market succeeds in cutting emissions.

    About Stabilisation fund

    • Money in the fund would be used by a market regulator to buy carbon credits if prices fell too low.
      • Consistent investor interest in credits and a floor under the price would be needed because sharp falls in the market could discourage industries from reducing carbon dioxide emissions
    • Planning envisages the market becoming fully operational in 2026, covering 37% of the country’s emissions.
      • In creating a carbon market, a country sets a limit on emissions and then allocates a corresponding quantity of tradable permits, or credits, to emitters. 
    • Market landscape: The Indian market would cover emissions of carbon dioxide and also five other greenhouse gases valued in terms of their carbon dioxide equivalence.
      • In a part of the planned market to be called the compliance market, participation would be obligatory for entities in a dozen sectors, such as oil refining, steel, aluminium and cement, the sources said. 
      • Another part, the voluntary market, would be open to other entities.
    • India’s carbon market is being set up in two phases, according to the government’s presentation slides. 
      • In the first phase, between 2023 and 2025, the existing energy-savings certificates will be converted to carbon credits.
    • India’s Commitment: India has committed to cutting its ratio of greenhouse emissions to the gross domestic product by 2030 to 45% of its 2005 level and to net zero by 2070.

    Do you Know?

    • the World Bank had shown interest in financing the carbon market if a stabilisation mechanism were created. 
      • The bank extended an $8 million grant to India in 2016/17.
    • The World Bank continues to remain committed to supporting India in developing a carbon trading market and other instruments to help scale up financing for key climate transitions.

    Source: TH