India

IN-2:Perform Achieve Trade Scheme (PAT Scheme)

Policy Description

The Perform Achieve Trade (PAT) is an innovative, market-based trading scheme announced by the Indian Government in 2008 under its National Mission on Enhanced Energy Efficiency (NMEEE) in National Action Plan on Climate Change (NAPCC). It aims to improve energy efficiency in industries by trading in energy efficiency certificates in energy-intensive sectors.

Description

The Perform Achieve Trade (PAT) is an innovative, market-based trading scheme announced by the Indian Government in 2008 under its National Mission on Enhanced Energy Efficiency (NMEEE) in National Action Plan on Climate Change (NAPCC). It aims to improve energy efficiency in industries by trading in energy efficiency certificates in energy-intensive sectors [1] [2]. The 2010 amendment to the Energy Conservation Act  (ECA) provides a legal mandate to PAT. Participation in the scheme is mandatory for Designated Consumers under the ECA. It is being administered by the BEE that sets mandatory, specific targets for energy consumption for larger, energy-intensive facilities. The PAT Scheme is being implemented in three phases- the first phase runs from 2012-2015 covering 478 facilities from eight energy-intensive sectors, namely aluminium, cement, chor-alkali, fertilizer, iron and steel, pulp and paper, textiles and thermal power plants [3]. This accounts for roughly 60% of India’s total primary energy consumption.It targets energy consumption reductions of 6.6 million tons of oil equivalent in the 478 covered facilities [4].  

The scheme imposes mandatory specific energy consumption targets on the covered facilities with less energy efficient facilities having a greater reduction target than the more energy efficient ones.. A facility’s baseline is determined by its historic specific energy consumption between 2007-2010. Facilities making greater reductions than their targets receive “EsCerts” or “energy saving certificates” which can be traded with facilities that are having trouble meeting their targets, or banked for future use. The PAT scheme establishes plant-specific targets rather than a sectoral target, with the average reduction target being 4.8% that is to be achieved by the end of the first phase (2015).

The approach is as follows [1]:

  • Specification of specific energy consumption (SEC) norm for each designated consumer in the baseline year and in the target year (*2);
  • Verification of the SEC of each designated consumer in the baseline year and in the target year by an accredited verification agency;
  • Issuance of Energy Savings Certificates (ESCerts) to those designated consumers who exceed their target SEC reduction;
  • Trading of ESCerts with designated consumers who are unable to meet their target SEC reduction after three years;
  • Checking of compliance, and reconciliation of ESCerts at the end of the 3-year period. In case of non-compliance, a financial penalty is due. 

The scheme is being designed and implemented by the Bureau of Energy Efficiency (BEE), under the Ministry of Power of India. A newly established company Energy Efficiency Services Ltd (EESL) will administer the trading [7].

 

Details of the subsequent phases of the PAT scheme are slim but early signs hint at a broadening of the scheme to include other energy-intensive sectors like petroleum refineries, petrochemicals, chemicals etc. The government is also considering the tightening of targets.

Policy Information Expand this section for information on the key features of the policy, such as its date of introduction, categorization, main objective(s) and linkages with other policies.

Policy Categorisation

Policy Instrument Type: Economic, Emissions Trading, Administrative

Position in the Pyramid

About Us

Participation: Mandatory

Period

Start Date: 2012

Policy Linkages

Supported By
Supported By
Supported By
Replaces

Agencies Responsible

Bureau of Energy Efficiency (BEE)

Primary Objective: Energy

Objective

To enhance cost effectiveness of improvements in energy efficiency in energy-intensive large industries and facilities. The government expects the scheme to deliver reduce emissions by 26 million tonnes of carbon dioxide equivalent (CO2e) by 2015 [4][12]

Target Group

For the first phase, eight energy-intensive sectors are covered, namely aluminium, cement, chor-alkali, fertilizer, iron and steel, pulp and paper, textiles and thermal power plants [3]

Driver of energy consumption or emissions affected by policy: Energy efficiency

Implementation Information Expand this section for information on targets, monitoring, verification and enforcement regimes, and implementation requirements and tools.

Coverage

For the first phase, eight energy-intensive sectors are covered, namely aluminium, cement, chor-alkali, fertilizer, iron and steel, pulp and paper, textiles and thermal power plants

Quantitative Target? yes

Target: Specific targets established according to Specific Energy Consumption (SEC) of cluster of plants (*4) (*5) [1].

Time Period: 2012-2015 (first phase)

Progress Monitored? yes

Verification Required? yes

Enforced? yes

Sanctions: Penalties for non-compliance (Maximum of Rs. 10,000 and Rs. 1,000 for every additional day of default). Penalty will be INR 10 lakhs and measured in terms of the market value of tonnes of oil equivalent. The cost of energy was determined to be INR 10,154 per tonne of oil for 2011-2012.

Requirements on the Target Group

Provide plant level data for baseline SEC assessment. Monitor and report on SEC and allow verification.

Support by Government

The Government develops the baseline and allocation system, establishes the trading platform, provides monitoring and verification protocols, and sets up an accreditation system for verifiers. A newly established public company (Energy Efficiency Services Ltd) administers the trading [10].

Implementation Toolbox

The most important tools providing support to the implementation of this policy are the monitoring and verification protocols that participants must comply with, the methodology for setting the company targets and the framework for trading.

Complexity of Implementation

Government

The system and methodology are complicated as it will need to account for large differences in level of energy efficiency within sectors. New trading system to be set up. Also, to date, India has not had experience with benchmarking or market-based systems.

Target Group

System is new to the participating companies. In most sectors no experience with efficiency standards or targets.

Impacts, Costs & Benefits Expand this section to find information on policy effectiveness and efficiency.

Impact Quantitative Estimate Qualitative Estimate
Estimated effect on energy consumption or emissions ­The government expects to deliver 26 million tons of CO2e reductions by the end of the first phase [4] Not available.
Estimated costs/benefits for industry Achieving the target for the first phase is expected to cost the industry $5.4 billion [4] Not available.
Estimated cost for government Not available. Not available.
Other Benefits
General Benefits Reduce energy intensity, GHG emissions and other environmental pollutants, reduce energy costs, improve competitiveness.
Specific Benefits Minimises the cost for increasing sector-average energy efficiency; Aid in energy security, technology upgrade and lower environmental impacts.

References & Footnotes

References

[1 ] Bureau of Energy Efficiency (2010). Implementation of Energy Conservation Act and BEE Action Plan. Retrieved from: http://www.emt-india.net/Presentations2010/26-Fertiliser_30Aug2010/BEE.pdf

[2] British High Commision New Delhi (2010). Carbon Disclosure Project 2010 India 200 Report. Retrieved from: https://www.cdproject.net/CDPResults/CDP-2010-India-Report.pdf

[3] Namrata Patodia Rastogi (2012). India’s Evolving Climate Change Strategy. Climate Change and the Law. Pages 605-618

[4] CDKN (2013). Creating Market Support for Energy Efficiency. Available at http://cdkn.org/wp-content/uploads/2013/01/India-PAT_InsideStory.pdf

[5] Jaiswal, A. (2010). Perform, Achieve, and Trade: A New Direction for Indian Industry, Sep 2010. Retrieved from: http://switchboard.nrdc.org/blogs/ajaiswal/perform_achieve_and_trade_a_ne.html

[6] Indian Paper Manufacturers Association (IPMA) (2010). Article, Pulp & Paper under PAT scheme (March 10). Retrieved from: http://www.ipma.co.in/news_events.asp

[7] Union Power Minister Launches “PAT“ Scheme under NMEEE Energy Intensive Industries to Benefit by Trading ESCerts Energy Saving of 6.6 million tonnes oil equivalent by 2014-15 - Press release July 10, 2012. Retrieved from: http://www.pib.nic.in/newsite/erelease.aspx?relid=85182

Footnotes

(*2) Essentially PAT will be structured on the basis of unit-level benchmarking of energy used per unit of output, that is, SEC. This can vary widely across two units making the same product, but with different manufacturing processes. It can also vary among old and new plants that have different plant sizes, capacity utilisation levels and grades of raw material used.

(*4) DC mandated to reduce its SEC by a fixed percentage, based on its current SEC within the sectoral bandwidth. Almost all the industrial sectors are characterized with a wide bandwidth of specific energy consumption which is also indicative of large energy-savings potential in the sector. The wide bandwidth is a reflection of the differences in the energy-saving possibilities amongst plants because of their varying vintage, production capacity, raw material quality, product pix etc.

(*8) Verification agencies which could be accredited energy auditors under the EC Act to assume liability for verification along with other credible certification agencies