Can you earn money by making your industry energy -efficient? This may be possibile in India, going by the most recent draft of the national action plan on climate change. Among the eight missions it proposes, there is one on energy efficiency. It will seek market-based mechanisms to make energy- efficient technology more affordable. If the government manages to think this through, Indian industry and the energy-guzzling public utilities will witness interesting changes.

In one of the mechanisms proposed by the Bureau of Energy Efficiency, the government may challenge companies to “exceed” their energy targets. Once they achieve such higher efficiencies, they can trade the surplus to sectors that have not managed to achieve this. Under this “exceed and trade” system, large energy consuming facilities would be issued certificates for energy savings that they can trade.

So far, the world has decided to face the challenge of cutting down on carbon emissions by using market mechanisms under the Kyoto protocol. There is a “cap and trade” system that works by setting limits on carbon emissions across organisations (the cap) and then sets up market mechanisms that allows those organisations to exchange the right to emit with one another (trade). It gives organisations in rich countries the flexibility to either cut their own emissions or fund the cutting of emissions elsewhere, such as in India, at a lower cost.

India is placed in a precarious position. It cannot take part in the Kyoto process by setting caps. India’s stance in has been that, unless developed countries cut their emissions, it will not make any commitments to do so. At the same time, India, as one of the top five emitters in the world, is under tremendous pressure to show that it is taking some action to control its runaway emissions. China produced a national plan last year. In India, a council was set up under the chairmanship of the prime minister to finalise the draft of this plan.

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