CLIMATE NEWSLETTER

Climate
Quotient
September - October 2023

INSIDE PAGES

▪ MULTILATERAL ENVIRONMENT
AGREEMENTS
▪ CARBON MARKETS
▪ ESG
▪ OTHER KEY UPDATES

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Multilateral Environment Agreements

Paris Agreement “Global Stocktake” to Begin
Key Takeaway for Businesses
Soon; UN Issues Report on Paris Agreement
The findings of the previous stocktake will
Implementation
provide much fuel for political discussions at
COP28, the annual conference of UN members for
COP28. COP28 is slated to focus primarily on
climate change negotiations, will witness the
the implementation of the Paris Agreement,
conclusion of the first ever “global stocktake” on the
and the findings of inadequacy in the report
Paris Agreement. The global stocktake is a two-year
will likely see UN members demanding
long process wherein UN members report and analyze
immediate and better climate commitments
their implementation of the Paris Agreement, which
from other members.
began with COP26 in 2021. The first leg of the global
stocktake, relating to data collection and analysis, Amongst other issues, this would also
culminated in the UN’s synthesis report on the facilitate discussions on financial flows from
technical dialogue of the first global stocktake (report). developed to developing nations. As a result,
developing countries like India are actively
The report concluded that despite the heightened
pursuing climate financing from developed
global focus on climate change and sustainability, the
nations. Securing climate financing, such as
world is not on track to implement the goals
subsidies for green goods, would provide
envisioned in the Paris Agreement, such as limiting
lucrative commercial opportunities to
global warming to a maximum of 2°C (even assuming
businesses operating in the sustainability
perfect implementation of all individual commitments
sector, especially those dealing with green
by countries). It noted that there is a significant gap
goods and services.
between the trajectory the world is currently on
against the trajectory needed to ensure climate change
does not reach irreversible levels, which would require UNFCC Negotiators Agree on Details for Loss
emission reductions of 43% by 2030 and 65% by 2035 and Damage Fund for Developing Countries
(against 2019 levels).
At the fifth meeting of the United Nations’ Framework
The report is to be followed by the second leg of the on Climate Change’s transitional committee, members
global stocktake, i.e. COP28 beginning on November agreed on a blueprint for the “Loss and Damage Fund”
30, 2023. COP28 represents the political phase of the (LDF) meant to provide financial relief to developing
global stocktake, wherein UN members are expected countries damaged by climate disasters
to conduct further climate negotiations on the basis of (agreement/blueprint).
the findings contained in the synthesis report.1
The LDF was agreed in-principle by UN members in
2022 at COP27, but negotiations on the modalities of
the LDF have remained slow-moving since then. The
present agreement represents the biggest
development towards operationalizing the fund and is

1
Will the first global stocktake be the spur for getting focus.blog/2023/10/30/will-the-first-global-
us on track to reach the Paris Agreement’s goals?, stocktake-be-the-spur-for-getting-us-on-track-to-
OECD, available at https://oecd-environment- reach-the-paris-agreements-goals/.
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an unexpectedly positive outcome considering the lucrative commercial opportunities to

contentious negotiations at the meeting.2 businesses operating in the sustainability
sector, especially those dealing with green
The LDF will be hosted at the World Bank for a four-
goods and services.
year period, with the creation of a “Board” to
administer the functioning of the LDF and approve
funding in line with the fund’s eligibility criteria. The
LDF will be funded from contributions by UN members,
with developed countries being “urged” to contribute.
The language of the blueprint however does not clarify
whether contributions would be voluntary or
mandatory. On one hand, this must be seen in the
context the US failing to include language that would
make contributions voluntary and on the other hand,
developing countries arguing for language making
contributions mandatory.3

Key Takeaway for Businesses

The findings of the previous stocktake will
provide much fuel for political discussions at
COP28. COP28 is slated to focus primarily on
the implementation of the Paris Agreement,
and the findings of inadequacy in the report
will likely see UN members demanding
immediate and better climate commitments
from other members.

Amongst other issues, this would also

facilitate discussions on financial flows from
developed to developing nations. As a result,
developing countries like India are actively
pursuing climate financing from developed
nations. Securing climate financing, such as
subsidies for green goods, would provide

2 3
‘Loss and damage’ deal struck to help countries World Bank poised to host climate loss and damage
worst hit by climate crisis, The Guardian, available at fund, despite concerns, Reuters, available at
https://www.theguardian.com/environment/2023/no https://www.reuters.com/sustainability/sustainable-
v/05/countries-agree-key-measures-to-fund-most- finance-reporting/world-bank-poised-host-climate-
vulnerable-to-climate-breakdown. loss-damage-fund-despite-concerns-2023-11-04/.
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Carbon Markets

Bureau of Energy Efficiency to Hold Stakeholder

Key Takeaway for Businesses
Consultations for Draft Rules for the Indian
Carbon Market The Indian Carbon Market is an inevitability,
and while there may be time until its
In June 2023, the Ministry of Power notified India’s highly implementation, businesses should give
awaited Carbon Credit Trading Scheme (CCTS). The CCTS adequate consideration to the impact
notification laid down the broad contours of the scheme, carbon credit trading can have on their
such as its covered emissions, the administering long-term business.
authorities, the baseline-and-credit model sought to be
adopted and the trading mechanism. However, a number Considering that various modalities
of aspects of the CCTS were left for future rulemaking, regarding the CCTS are currently undecided,
such as monitoring, reporting and verification procedures, these stakeholder consultations are a
procedures for accrediting of carbon verification agencies, valuable tool for businesses to gain insights
trading procedures, etc. into upcoming rules for administering the
CCTS. Considering that issues such as
In light of the same, the Bureau of Energy Efficiency (BEE) monitoring, reporting and verification of
will be conducting stakeholder consultations for the draft emissions would likely incur substantial costs
“Accreditation Procedure and Eligibility Criteria for (as well as require changes in internal
Accredited Carbon Verification Agency” and draft processes) for businesses, early insight can
“Detailed Procedure for Compliance Mechanism under allow businesses to prepare and mitigate
Carbon Credit Trading Scheme” through October & last-minute risks.
November, 2023.
Additionally, these consultations also offer
businesses a chance to collaborate in
rulemaking processes, ensuring that the
government is aware of the potential
practical and commercial difficulties in
fulfilling the requirements of the CCTS.

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China Adopts Key Policies for Revamping its including third-party verification of projects and disclosure
National Carbon Market requirements.

China has recently adopted the “Measures for the

Administration of Greenhouse Gas Voluntary Emission Key Takeaway for Businesses
Reduction Trading” (Measures), jointly released by China’s The recent adoption of the aforesaid Measures
Ministry of Ecology and Environment, and the State (as well as the preceding consultations) by
Administration for Market Regulation. The Measures China, signals its commitment to revamp the
create a regulatory framework for the revamped Certified CCER. As China's carbon market evolves and
Emission Reduction (CCER) (which was originally notified expands to more industries, demand for CCER is
in 2012 and then suspended in 2017) and after being expected to rise, presenting opportunities for
passed in principle in September 2023, have now been businesses to engage in sustainable projects and
finalized and adopted on October 19, 2023. offset carbon emissions.
As per the Measures, the CCER will now adopt a unified
trading platform for the entirety of the market, as opposed This is further helped by China’s intention to
to the previous model of multiple fragmented trading tighten monitoring, reporting and verification
platforms. This unified system would also be implemented processes to match them with global standards,
for registry-related functions such as registration of which can open up offset projects to buyers
products, tracking transactions, holding of credits, etc. It is around the world.
also expected that the revamped CCER would involve
stricter monitoring, reporting and verification processes,

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Environmental Societal and Governance

transition, as well as incorporating net-zero related
US Treasury Releases Principles for Net-Zero
considerations for internal decision-making,
Financing & Investment administrative processes and resource allocation/business
Recognizing the importance of private finance to adopt planning.
climate-positive investment practices, the U.S. Treasury Finally, the Treasury highlights that any credible
(Treasury) has recently released nine voluntary principles commitment towards net-zero finance and investment
to guide net-zero financing and investment practices by must also involve appropriate transparency. Entities
private financial institutions. should consider more comprehensive and voluntary
Broadly, the nine principles are based on extensive disclosures than those already required by law. They
research and stakeholder consultations by the Treasury to should also consider disclosing “quantitative information”
identify global best practices in reducing global warming that allows an evaluation of the progress made by the
caused by private financial institutions (such as by entity towards achieving its commitments, as well as to
investing in heavily polluting sectors). According to the allow comparisons against other institutions.
principles, entities adopting net-zero commitments must
align them to the goal of limiting global warming to 1.5°C Key Takeaway for Businesses:
and create a “net-zero transition plan”. This transition plan Primarily, the principles do not create any
would act as a framework to implement net-zero practices additional compliance obligations due to their
into the operations of the entity and should cover voluntary nature. However, the formulation of
operations starting from the entity’s overall climate these principles by the Treasury can serve as
commitments and ending with governance changes made valuable guidance as to what the U.S.
to implement said commitments. government considers as best practices for
In terms of ways to effect net-zero financing and implementing net-zero commitments by the
investments, the Treasury suggests practices like private sector. Additionally, considering the
transition finance, managed phaseout investments and definite shift of the private sector towards a
financing, as well as assisting the development of healthier planet,4 the adoption of these
innovative solutions to climate change, as ways to engage principles can allow financial institutions to
in net-zero finance. In doing so, the entity should analyze mitigate various climate-related financial risks
existing and potential client & company portfolios in line such as overexposure to highly-polluting sectors
with its stated commitments. leading to stranded assets,5 as well as missed
investments in opportunities presented by the
Additional best practices involve ways to alter internal
global green transition.6
processes such as establishing policies and conditions for
dealing with sectors “highly relevant” to the net-zero

4
ESG Global Study 2022, Harvard Law School Forum on available at
Corporate Governance, available at https://www.lse.ac.uk/granthaminstitute/explainers/wh
https://corpgov.law.harvard.edu/2022/06/17/esg-global- at-are-stranded-assets/.
6
study-2022/. Green Growth Opportunities, IMF, available at
5
What are stranded assets?, Grantham Research https://www.imf.org/en/Publications/fandd/issues/2022
Institute on Climate Change and the Environment, /12/green-growth-opportunities-ricardo-hausmann.
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Other Updates
Draft Ecomark Certification Rules, 2023 R&D Roadmap for Green Hydrogen Ecosystem
Revamping 1991’s pre-existing Ecomark scheme, the in India
Ministry of Environment, Forest and Climate Change has
recently notified the draft Ecomark Certification Rules, In October 2023, the Ministry of New and Renewable
2023 (Ecomark Rules) for public inputs. Energy unveiled its “R&D roadmap for green hydrogen
ecosystem in India” (Roadmap). This roadmap is part of
The Ecomark Rules seek to provide special labelling of the larger National Green Hydrogen mission and boasts a
products that have lesser adverse impacts on the budget of INR 400 crores for an initial period of 2-3 years.
environment with the objective of promoting consumer
adoption of such products. Ecomarks are proposed to be The roadmap covers activities related to green hydrogen
applied to products upon an application to the Central production, storage, transport, end-use applications, and
Pollution Control Board (CPCB), subject to the fulfilment safety. The roadmap seeks to promote short term (0-5
of the specific environmental criteria applicable to said years), medium term (0-8 years) and long term (0-15
product/product class. This also includes fulfillment of any years) projects for the above activities.
Quality Control Orders or national/international quality
Additionally, the roadmap also envisions a public-private
and safety standards applicable to the product.
partnership framework for R&D in green hydrogen, with a
To enforce the Rules, market surveillance is envisioned dedicated R&D fund and inputs from government and
covering sample-based inspections, investigating misuses industry. To promote a green hydrogen ecosystem, it
of Ecomarks, conducting surprise searches, etc. This can recommends an industry-academia-government network
be done by either the CPCB or authorities empaneled by to ensure seamless transfer and commercialisation of new
it for this purpose. Conversely, “Designated Ecomark technology in this sector.
verifiers” are proposed to be established as third-party
verifiers (under the aegis of the CPCB) to assess Key Takeaway for Businesses
conformity with the Ecomark criteria for products,
including factory visits, sample collections, audits, etc. The roadmap is a valuable addition to India’s
green hydrogen policy framework and identifies
Lastly, the Ecomark Rules propose the creation of an
key areas of opportunity in the growing green
“Ecomark Portal”, which shall serve as a central database
hydrogen sector. This also presents businesses
and registry for registered entities, Designated Ecomark
and academia further clarity on focus areas of
verifiers, and other entities created under the Rules. The
portal would also track the number of applications made policy support by the government. Also, the
for grant of Ecomarks, as well as the sales effected for R&D fund coupled with the promise of inviting
each product under the Ecomark scheme. venture capital can serve to alleviate cost-
related risks for businesses seeking to enter this
uncharted space.
Key Takeaway for Businesses:
The Ecomark Rules are a significant development
towards promoting sustainable consumption in
Ministry of Environment and Forests Notifies
India. A comprehensive Ecomark regime can allow
businesses with environmentally friendly products Green Credit Rules, 2023
to differentiate themselves from competitors and
In addition to India’s CCTS, the central government had
benefit from growing awareness among consumers
previously also notified draft implementation rules for the
regarding sustainability. However, the efficacy and
upcoming voluntary Green Credit Programme (Program).
integrity of the Ecomark scheme in the eyes of
These rules have now been crystallized into the Green
consumers is subject to the environmental criteria
Credit Rules, 2023 (Rules) and have entered into force
established for products at a later stage.
from October, 2023. The Program as envisioned by these

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rules comes at the heels of a policy initiative termed as disbursement, and the functioning of the trading
“Mission LiFE - Lifestyle for Environment”, which aims at platform. The implementation of said guidelines would be
cultivating environmental-friendly lifestyle changes within subject to the approval of the central government.
the Indian populace.
The Program envisions 8 types of green credits with each Key Takeaway for Businesses
type of credit representing an environment-positive The Program presents novel revenue generation
activity, such as a “Tree Plantation-Based Green Credit” avenues for businesses. Assuming a healthy
for afforestation related activities, or a “Waste price for green credits, businesses are
Management based Green Credit” for sustainable & encouraged to establish environmentally
improved waste management practices. These activities positive activities to receive credits, which can
can be undertaken by any person or entity for receiving generate revenue by being sold on trading
green credits. platforms. While it remains unclear as to how
demand would be generated for a completely
However, the rules are ambiguous on a number of voluntary programme such as this, experiences
modalities relating to green credits. Primarily, the rules from offset mechanisms around the world
are ambiguous on the stage of the covered activity at suggest that demand for credits can exist even
which the credits will be issued. Additionally, the rules in voluntary programs.
imply that different types of credits under the Program
would be fungible with respect to other types of credits. However, as things stand, the substantial
The rules however require that the thresholds of ambiguity contained in the rules make it harder
generating credits would need to have equivalency in for businesses to commit resources towards
terms of the effort and resources taken to generate each these activities. Amongst other factors, the lack
of clarity regarding the value of credits as well
type of credit - it therefore remains unclear as to how this
as the modalities of credit generation vis-à-vis
parity would be achieved. Furthermore, it's important to
each activity are important considerations
recognize the need for parity between thresholds to guiding the choice of activities to be undertaken.
prevent credits with lower requirements from Regardless of the same, businesses who have
overshadowing demand for other credit types. However, already implemented environmentally positive
this consideration raises broader questions about the activities as part of their corporate social
inherent value and practical use of each credit category. responsibility initiatives would be well placed to
benefit from the Program.
Similar to the Indian Carbon Market, the Program would
also consist of a trading platform for trading between
credits, administered by service providers and State of Gujarat Notifies Renewable Energy
supplemented by a green credit registry to track Policy
transactions and issuances. Guidelines for trading of
green credits, as well as criteria for selection and functions The State of Gujarat notified its new Renewable Energy
of trading service providers would be fleshed out in future Policy (Policy) in early October, with an aim to facilitate
guidelines. Notably, the rules also envision that activities investments in renewable energy (RE) worth INR 5 lac
registered under the Program generating green credits crores in the state. It replaces separate policies previously
may also simultaneously generate carbon credits under issued by the state, i.e. the Gujarat Wind Power Policy
other schemes. However, further clarity is needed on how 2016, the Gujarat Wind Solar Hybrid Power Policy 2018,
the Program would interact with the Carbon Credit and the Gujarat Solar Power Policy 2021, and is meant to
Trading Scheme. act as a broad framework for rulemaking by the Gujarat
Electricity Regulatory Commission.
The Program would mainly be monitored and
administered by the Indian Council of Forestry Research The Policy, which is expected to operate till September,
and Education (ICFRE). The ICFRE is tasked with 2028, provides a framework for the establishment of RE
recommending guidelines related to the implementation projects for either captive consumption of electricity or
of the Program, monitoring, reporting & verification of sale to third parties, regardless of scale or minimum
activities, modalities of credit generation and capacity. The covered RE projects are all ground mounted

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solar, roof top solar, floating solar, canal top solar, wind,
rooftop wind and wind-solar hybrid projects, except those Key Takeaway for Businesses
used to supply power to units producing green hydrogen Gujarat’s new RE Policy’s inclusion of RE
or green ammonia.7 In addition to these projects, it also projects, regardless of their scale or capacity
envisages the promotion of RE parks with a minimum makes it easier for businesses to establish RE
capacity of 50MW. projects (such as rooftop solar) as a means to
generate captive electricity. This not only allows
To be covered by the Policy, the solar and wind equipment
businesses to offset electricity costs by
used by projects must be covered by the “Revised List of generating their own electricity, but also opens
Models and Manufacturers” of wind turbines, or the “List up avenues for revenue generation by sale of
of Approved Models and Manufacturers of Solar electricity to third parties.
Photovoltaic Modules”. However, prototype wind turbines
can also be established on approval by the state nodal The Policy also ensures that projects established
agency. The components imported for manufacturing under the Policy continue to receive long-term
such prototype wind turbines would be exempt from benefits, providing reliability which in-turn
customs and excise duties. Notably, RE projects would also softens apprehensions against incurring the
be eligible for receiving carbon credits under various initial capital expenditure to establish these
voluntary national and international standards.8 projects.

The benefits/incentives formulated under the Policy

would be applicable to RE projects for either 25 years or
for the lifespan of the project, whichever is earlier.

ELP Explainer: Common-But-Differentiated-Responsibilities

“Common-But-Differentiated-Responsibilities” (CBDR) is a principle of international environmental law which recognizes

that while addressing climate change is the common responsibility of all countries, all countries cannot equally combat
climate change. It requires richer, developed nations to commit more funds towards fighting climate change than poorer,
developing nations, due to higher past emissions by developed nations facilitating their economic prosperity.

The importance of CBDR stems from the fact that not only do developing countries have lesser resources to implement
climate-positive technologies (such as moving away from fossil fuels), they are also faced with additional considerations
such as prioritizing poverty elimination and infrastructure development. Thus, CBDR balances the need for spurring all
countries for tackling climate change against the costs (financial and otherwise) of doing so.

7
The policy states that RE projects for supply of electricity
to green hydrogen or green ammonia production will be
overed by a subsequent policy.

8
It is unclear whether the generation of carbon credits
would also extend to the upcoming carbon credit trading
scheme.

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