Context
At a recent stakeholder consultation meeting, the national government agency Bureau of Energy Efficiency (BEE) revealed that the Carbon Credit and Trading Scheme (CCTS), which was unveiled earlier this year for the upcoming Indian Carbon Market (ICM), will most likely be altered soon. 

What is the Carbon Trading and Credit Scheme in India?  
The CCTS initiative in India aims to facilitate the trading of carbon credits among businesses. These credits lead to a decrease in greenhouse gas emissions. If a company emits less than the allowed quantity, it may sell its excess credits to another company that exceeds its limit. With the help of this initiative, India will be able to better manage and reduce its total carbon emissions.

What is the CCTS regulatory framework?  
• The regulatory structure of the CCTS is overseen by the National Steering Committee. This committee, which is in charge of the entire program, is made up of eighteen departments and ministries.The Central Electricity Regulatory Commission (CERC) is designated as the sole regulatory agency in the program.
• In addition, the Bureau of Energy Efficiency administers the market, while the Grid Controller of India oversees participant registrations.
• In this program, the carbon credit market is regulated by the CERC, despite its previous oversight by the Securities and Exchange Board of India (Sebi).

What types of challenges exist?   
• Regulatory barriers: In October 2021, the Supreme Court ruled that the Central Electricity Regulatory Commission (CERC) would regulate the spot market for power, but only for emergency deliveries lasting up to eleven days. The Securities and Exchange Board of India (SEBI) would oversee the market for futures and options. 
• CERC will regulate the carbon credit trading system (CCTS); however, since carbon credits are essentially a financial market, SEBI should be the regulator in accordance with the SC order. 
• Complicated market structure: The carbon credit trading system (CCTS) has a complex market structure with multiple agencies and supervisory organizations involved. This may make it more difficult for businesses to comply, potentially increasing the cost of carbon credits.
• The framework leaves open the question of whether domestic and international carbon abatement certificates will be recognized in the new program, which can be confusing and difficult for businesses trying to meet emission standards. 
• Uncertain validity of international certificates: There is disagreement over whether or not carbon certificates should be fungible, meaning that while subdividing them to increase value is often advantageous for financial markets, a standard, fungible commodity would be more effective for the carbon market.

LTX Mains Question: 
Q. The degree to which carbon credit and trading schemes are integrated into the broader framework of climate policy determines their effectiveness and impact as a tool for promoting emissions reductions. Assess.