Increased carbon credits from the EV ecosystem can help India export more credits and attract more FDI.
The world is facing a climate catastrophe. Tackling climate change has become a global challenge and countries are coming together to limit the devastating impact of this existential crisis. At the COP26 last year, many countries, including India, pledged to contribute towards net-zero emissions.Along with other measures needed to reach net-zero, electric vehicles (EVs) have been witnessing a full throttle push and widespread adoption for their near-zero emission capabilities. Almost all auto brands globally are suddenly going hitherto to launch EVs.
How can EV industry generate carbon credits?
There is a lack of understanding on how the industry can generate carbon credits. To understand, let’s first simplify carbon credit: It is one of the most commonly used legally tradable certificates to offset greenhouse gas emissions. One carbon credit is one metric tonne equivalent of carbon dioxide reduction or absorption from the environment. In the context of EVs, carbon credits are generated by replacing fossil fuel-based vehicles with electrified vehicles that have significantly lower emission levels and source electricity from renewable energy projects or less carbon-intensive fuels.
Like in any carbon offset project, emission reduction in case of EVs is also calculated using the basic framework of tracking baseline, project and leakage emissions. While leakage emissions in EVs are negligible, baseline emissions are tracked as emissions of a traditional fossil fuel vehicle with similar characteristics. Project emission is the emission by the EV ecosystem and it includes emissions due to the production of electricity that is used to charge batteries.
The EV industry uses two methodologies for generating carbon credits:—Clean Development Mechanism (CDM), and—Voluntary Carbon Standards (VCS).While the methodology available in CDM is used for operation and/or charging of electric and hybrid vehicles for providing passenger and/or freight transportation services; existing methodology in VCS is used for project activities like charging station installation and associated infrastructure.
Carbon credits can foster EV growth
Charging systems earn carbon credits for providing renewable energy to power EVs. Charging station owners can, thus, generate additional revenues from carbon credits, achieving a greater return on investment. This concept is relatively new and there is lack of clarity on the process and pricing; charging station owners should consult climate experts who can help them register and validate their charging stations for credit generation and monetization.
While this will directly reduce the impact of the usage of fossil fuels on the environment, it will offer indirect opportunities for increased climate action by attracting investment and scalability in the EV industry. Monetization of carbon credits will enable additional revenue inflow into the industry while also encouraging more businesses to enter the market. As the deployment of charging stations increases, it will facilitate the adoption of more EVs.
Placing India on the global climate map with EV credits
While EV emissions are significantly lower than that of traditional vehicles, these are comparatively higher in India as charging systems use grid electricity. If Indian charging infrastructure providers can switch to renewable energy like solar, project emissions can be brought down to zero, enabling the EV industry to earn higher carbon credits.
India’s per-capita transport emission inventory is one of the lowest in G20 countries, but per-capita emissions growth (28%) is the highest due to rapid urbanisation and enhanced affordability towards personal mobility, fuelled by lack of efficient and convenient public/mass transportation. To achieve India’s commitment towards decarbonisation and to channelise the development towards green growth, the role of carbon credits needs to be efficiently explored.
Increased carbon credits from the EV ecosystem can help India export more credits and attract more FDI in its quest towards novel-technology electrification of the transport sector.
By : Manish Dabkara, CMD & CEO of EKI Energy Services Ltd
