Context: 

The Centre is now in the final stages of notifying an Emissions Trading Scheme (ETS) that will require polluting industries to achieve certain standards of energy efficiency and permit them to ‘trade’ these improvements.

About Emissions Trading Scheme:

• Emissions trading schemes may be established as climate policy instruments at the national level and the regional level. 
• Under such schemes, governments set emissions obligations to be reached by the participating entities. 
• The European Union emissions trading scheme is the largest in operation.

Emissions trading:

• Emissions trading, as set out in Article 17 of the Kyoto Protocol, allows countries that have emission units to spare – emissions permitted them but not “used” – to sell this excess capacity to countries that are over their targets.
  • Thus, a new commodity was created in the form of emission reductions or removals. 
• Since carbon dioxide is the principal greenhouse gas, people speak simply of trading in carbon. 
• Carbon is now tracked and traded like any other commodity. This is known as the “carbon market.”

Bureau of Energy Efficiency:

• Statutory Body:The Bureau of Energy Efficiency is a statutory body set up under the Energy Conservation Act, 2001.

• Role: The Bureau of Energy Efficiency assists the government in developing policies and strategies with a thrust on self-regulation and market principles with the primary objective of reducing the energy intensity of the Indian economy within the overall framework of the Energy Conservation Act, 2001.
• Nodal Ministry: Ministry of Power.

Image Source: Ministry of Power

Perform Achieve and Trade (PAT) Scheme:

• The Perform, Achieve, Trade (PAT) scheme was established by the National Mission for Enhanced Energy Efficiency. 
• It is a regulatory instrument to reduce specific energy consumption in energy intensive industries.
• The first cycle of the PAT Scheme (2012-2015) managed to reduce the energy consumption of more than 400 energy-intensive enterprises (known as Designated Consumers -DCs) by 5.3%, above the initial target of 4.1%.
• The trading of energy saving certificates (ESCerts) is central to the PAT programme and serves as an incentive to reach or surpass the mandatory targets. 
• The ESCerts, equivalent to 1 tonne of oil equivalent (toe) of energy savings, are given based on quantified energy savings verified by an accredited energy auditor.
• The Bureau of Energy Efficiency is the administrator and developed a platform to manage the ESCert trading process.

                                                                                                            News Source: The Hindu