An Overview Of The Energy Conservation (Amendment) Act, 2022

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The Energy Conservation Amendment Act, 2022 ("Act" ) received the assent of the President on 19th December, 2022 and came into force on January 1, 2023.

The Energy Conservation Amendment Act, 2022 (" Act" ) received the assent of the President on 19 th December, 2022 and came into force on January 1, 2023. The Act mandates the use of renewable energy and carbon-neutral technologies, as well as the implementation of sustainability features across industries. In addition, the Act aspires to establish a domestic carbon market and implement a carbon trading mechanism to assist India in meeting its climate mitigation obligations.

KEY AMENDMENTS

1. Introduction of a Carbon Credit Scheme: The Act empowers the Union Government to introduce a carbon credit trading scheme ("Scheme") to encourage the reduction of carbon emissions in the economy. While the amendment does not define carbon credit, it is commonly understood to be a tradable permit to emit a certain amount of carbon dioxide or other greenhouse gases. The central government or any authorized agency may award carbon credit certificates to entities that have registered and are in compliance with the Scheme. The certificates will be tradable by the entities. Any other person may purchase a carbon credit certificate voluntarily.
2. Notification of Energy Consumption Standards for Vehicles: According to the Act, the government of India can now notify energy consumption norms for more entities, including automobiles, vessels, industrial units, buildings, and institutions.
3. Energy Conservation Code for Buildings: Under the Principal Act, the term "energy conservation building codes" referred to norms and standards of energy consumption defined in terms of per square metre where energy is used. The Act, however, modifies this to "Energy Conservation and Sustainable Building Code," which establishes norms and criteria for energy efficiency, renewable energy use, and other sustainability-related requirements for various types of structures. Following the amendment, state governments will have a wider mandate to direct owners of big commercial and residential buildings to comply with energy efficiency and conservation regulations, as well as to use renewable energy and sustainable building materials. Further, the scope of buildings has also been increased to encompass offices and dwellings with a minimum connected load of 100 kW or contract demand of 120 kVA. It is important to take note that there is no specific definition of "industry units" or "establishments" in the amendment.
4. Utilization of Non-Fossil Resources: The central government will now prescribe a minimum share of use of non-fossil sources as energy or feedstock by designated consumers. The designated consumers are mentioned in the Schedule to the Energy Conservation Act, 2001 ("Principal Act") and include sectors such as aluminium, steel, cement, fertilizers, paper, sugar, railways, petrochemicals, and so on.
5. Changes in the composition of Bureau of Energy Efficiency (BEE): The Principal Act calls for the establishment of the Bureau of Energy Efficiency ("BEE"). The Act brings amendment to the original composition of the BEE, it increases the membership from 20-26 members to 31-37 members. It brings the total number of secretaries to 12 and a total of 7 representatives from industries and consumers.
6. State Governments to establish State Energy Conservation Funds: The amendment mandates that state governments establish energy conservation funds to promote energy efficiency and conservation initiatives. This fund will receive contributions from the central government's loans and grants, as well as all fees collected by the state government under its primary statute.
7. Increased Penalties: The Act increases the existing monetary penalties and includes specific references to vehicle manufacturers and vessels, with additional penalties imposed on these classes for failing to meet energy consumption norms.

• Apart from the maximum penalty of Rs. 10,00,000, the Act further imposes a minimum of Rs. 2000 and a maximum of Rs. 5000 for every in violation of the standards specified by the central government.
• The Act imposes penalties on vessels and vehicles in case of non-compliance to prescribed norms. In the case of non-compliance for vessels, an individual shall be responsible to pay an additional penalty of up to double the price of each metric tonne of oil equivalent consumed in excess of the stipulated norms, in addition to a penalty of up to Rs. 10,00,000.
• Vehicle manufacturers who violate the fuel consumption norms will face a penalty of Rs. 25,000 per vehicle for non-compliance with norms up to 0.2 litres per 100 km and a penalty of Rs. 50,000 per vehicle for non-compliance with norms above 0.2 litres per 100 km, in addition to the penalty of Rs. 10,00,000.
• Failure to comply with the limits issued for the minimum share of consumption of non-fossil sources by designated consumers shall attract a fine of up to Rs. 10,00,000. It will also incur a penalty of up to twice the price of oil equivalent of energy utilised in excess of the stipulated limit.
• Failure to give information to the BEE as prescribed, has been rendered punishable by a penalty of up to Rs. 50,000 for the first such failure and an additional penalty of up to Rs.10,000 for each successive failure.
• The Act adds a new clause to Section 28 of the Principal Act under which the adjudicating authority will now pay due regard to the loss caused to a consumer in addition to the two factors under the Act, namely (a) the amount of disproportionate gain or unfair advantage made as a result of the default, wherever quantifiable, and (b) the repetitive nature of the default.

OUR PERSPECTIVE

Significant amendments were made to the Principal Act to facilitate the attainment of the 26th UN Climate Change Conference of the Parties (COP-26) goals. The Act adds new concepts such as carbon trading and requires designated users to use non-fossil sources to facilitate swifter decarbonization and accomplishment of sustainable development goals. The Act is a welcome step that aims to address the country's growing demands and reduce its reliance on fossil fuels; thus, it has the potential to have a significant impact on the country's energy consumption patterns, promoting the use of renewable energy sources.

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