Potential of India to tap into the carbon market with carbon credits generated from Electric Vehicles (EVs)
By Nikita Shukla
India’s transportation sector accounts for about 10 percent of total national greenhouse gas (GHG) emissions. It is also the third-largest energy-related GHG emission source for the country, after power generation and industrial sectors. Of the total sectoral emissions, road transportation alone contributes about 87 per cent .1 2
With rapid urbanisation and increase in living standard and disposable income, India has experienced a five-fold growth in per capita vehicle ownership, registering a total road vehicle stock of over 250 million in 2019 (comprising of two-wheelers (2 W), three-wheelers (3 W), and four-wheelers (4 W)). With such a huge existing vehicular base and a rapidly growing economy, the Indian EV market can play an important role in reducing its transportation related GHG emissions.
What are the measures taken by the government to expand EV coverage in India?
Amidst growing momentum for emission reduction; clean air; Nationally Determined Contributions (NDCs) targets; net-zero commitments and energy-security concerns, the Government of India launched ‘National Electric Mobility Mission Plan’ (NEMMP) in 2013. Following this, several Indian states and businesses also proactively launched their state EV policies and announced corporate clean-mobility ambitions, respectively, to accelerate the transition.3 Despite that, we have only witnessed a mild increase in EV penetration in India (a total of ~1.4 million EVs are being used on the roads of India as on 3rd August 2022, which is less than 1 per cent of India’s overall vehicular base).4 This is because India’s EV market is grappling with various challenges, such as, inadequate infrastructure; range anxiety; insufficient push for technology along with investment in R&D, cost factor, metro-centric EV penetration among others.
What is the potential of EVs in reducing the national carbon emissions for India?
Converting India’s existing ICE vehicle fleet to electric will add additional terawatt-hours (TWh) of new demand to the grid. A study — by business lobby Assocham and consultancy EY — projects that overall power demand from EVs in India is projected to reach 69.6 TWh by 2030 compared to 79.9 gigawatt hours (GWh) in 2020. The existing power-distribution infrastructure in India derives most of its electricity through the grid (and, more than half of it is fed by coal-fired power plants). If this is not replaced by renewable energy (RE)-fed power generation, it would result in significant increase in the overall transport-related emissions in India (Table 1)
Note: Above estimates are based on the Assocham study, which estimates that EVs would lead to 697x10¹¹ kWh (or, 69.7 TWh) of additional power demand. All of these are very crude estimates and they have not been reviewed by any experts from the field.
[To explain the table: In 2030, EVs would require 697x10¹¹ kWh electricity. However, only 70% of our electricity comes from coal (BAU scenario). If EVs’ electricity needs come from coal: 697x10¹¹ kWh * 0.7 = 487.9x10¹¹ kWh. To quantify coal: 0.7 kg of coal leads to 1 unit of electricity, therefore, 0.7 * 487.9x10¹¹ kWh = 341.53x10¹¹ kg of coal would be required to run the EV charging stations. Emissions generated by 1 kg of coal = 2.42 kg of CO2. Emissions generated by 341.53x10¹¹ kg of coal = 82.65026x10¹² kg.]
Integration of carbon credits generated by the EV projects into overall carbon markets can lead to faster decarbonisation of the transport sector
Even though the decarbonisation journey in EVs could be achieved by deploying clean-energy powered EV charging stations, deploying them will require huge capital investments. To address this, the carbon market can be a potential tool to facilitate heavy green investment of infrastructure and technology. If the owners of EV charging stations can be given carbon credits for using more RE generated electricity, they can generate additional revenues by selling them in the carbon markets. This additional revenue can be used to offset the high capital costs of RE-fed EV charging stations.
The monetisation of carbon credits will also incentivise other entrepreneurs to enter the market, resulting in a virtuous loop. This could also result in increased exports of carbon credits (provided India allows for export of carbon credits) and attract more FDI in the quest towards innovative technology catalysing electrification of the transport sector.
Integration of carbon credits generated by the EV projects will depend on the development of India’s overall carbon markets
To generate carbon credits, the EV industry can follow two methodologies: the Clean Development Mechanism (CDM) and Voluntary Carbon Standards (VCS). CDM methodology is generally used for the operation and charging of electric and hybrid vehicles, to provide passenger/ freight transportation services. VCS methodology is used for project activities, like installation of charging stations and associated infrastructure.
However, there is a lack of comprehensive understanding on the process of generation of carbon credits by the EV industry. Nevertheless, the new Energy Conservation (Amendment) Bill 2022 — passed by the Lok Sabha in August 2022 — modifies the Energy Conservation Act (2001) and seeks to provide a regulatory framework for national carbon markets (NCM) in India. The Bill empowers the central government to specify a carbon credit trading scheme.
Way forward
To accelerate India’s international commitments towards decarbonisation, it is very important to design a robust national carbon market. Further, the role of carbon credits — in the EV market — also needs to be explored in detail. Revenue generated from carbon markets will encourage the owners of EV charging stations to invest in clean energy thus integrating electric mobility’s mission of emission reduction in India’s NCM.
References
Paladugula, Anantha Lakshmi, Nazar Kholod, Vaibhav Chaturvedi, Probal Pratap Ghosh, Sarbojit Pal, Leon Clarke, Meredydd Evans et al. “A multi-model assessment of energy and emissions for India’s transportation sector through 2050.” Energy Policy 116 (2018): 10–18.
Abdul-Manan, A.F.N., Gordillo Zavaleta, V., Agarwal, A.K. et al. Electrifying passenger road transport in India requires near-term electricity grid decarbonisation. Nat Commun 13, 2095 (2022). https://doi.org/10.1038/s41467-022-29620-x
https://www.thethirdpole.net/en/climate/use-renewable-energy-to-charge-electric-vehicles-in-india/ 4https://www.hindustantimes.com/car-bike/how-many-electric-vehicles-are-plying-on-roads-in-india-centre-reveals -count-101659764733485.html
https://www.thethirdpole.net/en/climate/use-renewable-energy-to-charge-electric-vehicles-in-india/
https://www.kazam.in/category/blog/how-to-trade-carbon-credits-using-electric-vehicle-charging
