Stabilisation Fund

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.

Source: TH