The Energy Conservation (Amendment) Act, 2022

What it does

The Energy Conservation (Amendment) Act, 2022 (Act No. 19 of 2022) received assent on 19 December 2022. It does not stand alone. It amends the Energy Conservation Act, 2001, and its importance is that it added two powers to that Act which together make a carbon market possible.

Clause (w) of section 14 lets the Central Government specify a carbon credit trading scheme. Section 14AA lets the Government, or an agency it authorises, issue a carbon credit certificate to a registered entity that complies with the scheme, and entitles that entity to buy or sell the certificate. The 2022 Act also made other changes to the 2001 Act, including to the penalty provisions in section 26.

Who it binds

It binds those to whom the 2001 Act applies, and, through the scheme made under it, entities registered in the carbon market. A plant that carries a target is bound by the scheme and the target rules, not by the 2022 Act in terms. The Bureau of Energy Efficiency administers the scheme and has published a detailed procedure for the compliance side.

What has changed, and when

The Ministry of Power used the first power on 28 June 2023, when it notified the Carbon Credit Trading Scheme, 2023 as S.O. 2825(E). An amendment of 19 December 2023, S.O. 5369(E), added an offset mechanism under which entities outside the compliance set can register projects and earn certificates.

The targets themselves do not come from this Act. They come from the Ministry of Environment, Forest and Climate Change, under sections 3, 6 and 25 of the Environment (Protection) Act, 1986. From 8 October 2025 the Greenhouse Gases Emission Intensity Target Rules, 2025 have given 282 named plants in aluminium, cement, chlor-alkali and pulp and paper a binding emission intensity target for 2025-26 and 2026-27. An amendment in force from 13 January 2026 added 208 more plants in secondary aluminium, refining, petrochemicals and textiles.

What turns on it in practice

The structure has three layers, and each comes from a different source of power. The 2022 Act supplies the power to create certificates and trade them. The 2023 scheme supplies the trading mechanism and the offset route. The Environment (Protection) Act supplies the target. The choice of parent Act for the targets matters, because a missed target is treated as an environmental default, enforced by the Central Pollution Control Board, and not as an energy efficiency lapse under the 2001 Act. The basis is in the text: section 26 of the 2001 Act, as substituted in 2022, sets penalties for failures under several clauses of section 14, and clause (w) is not among them.

For a plant with a target, the practical consequence is that a shortfall has to be covered by buying and surrendering carbon credit certificates, and a shortfall left uncovered draws environmental compensation at twice the average traded price. A plant that files nothing is treated as having made no improvement, because the shortfall is then worked out with the achieved intensity taken as the baseline.

For a project developer outside the compliance set, the offset mechanism is the route to earning certificates, and the value of a project depends on whether it registers under the scheme. These points arise in the project and land work of this practice, where environmental compliance is part of structuring an infrastructure project, and they are developed in the site's note on the carbon market, its plant-level targets and the cost of a shortfall.