The Energy Conservation (Amendment) Act, 2022 (“Act”) was notified on December 19, 2022 and aims to reduce India’s power consumption via fossil fuels thereby minimizing the nation’s carbon footprint. The key provisions of the Act are:

• Energy has been defined to mean any form of energy derived from fossil fuels or non-fossil sources or renewable sources.
• The Act introduces changes such as incentivising the use of clean energy by issuing carbon credit certificates. While carbon credit is not defined in the amendment, it is generally considered as a credit provided to an entity for reducing or avoiding specified amount of carbon emissions from its activities.
• It confers power on the Central Government to specify the carbon credit trading scheme and contemplates mandatory consumption of a minimum share of non-fossil sources by ‘designated consumers’ towards their energy demands.
• Any other person, other than the designated consumer whose energy consumption is more than the prescribed norms and standards, has been allowed to purchase energy saving certificate or carbon credit certificate on voluntary basis.
• The Central Government, or any agency authorised by it can issue carbon credit certificate to the registered entity which complies with the requirements of the carbon credit trading scheme. The said registered entity will be able to purchase or sell the carbon credit certificate in accordance with carbon credit trading scheme so specified by the Central Government.
• The Act brings large residential buildings within the fold of the Energy Conservation regime to promote sustainable habitats.
• The Act strengthens institutions set up originally under the Act, such as the Bureau of Energy Efficiency and provides imposing of penalty on anyone who fails to comply with the provisions of the Act.
• The Act also provides for establishment of fund by the State Governments for the promotion of efficient use of energy and its conservation within the State. This fund shall receive contribution from loans and grants provided by the Central Government and all fees received by the State Government for meeting the expenses of the designated agency in the discharge of its functions.

The amendment seeks to consolidate multiple aspects related to energy transition, efficiency and conservation under one legislation to meet its Nationally Determined Contributions as mentioned in the Paris Climate Agreement before its 2030 target date.