 to the session on environmental regulation and instrument. So, if you remember in the last session we are discussing about the difference between the command and control approaches and the market based instrument, then we have seen the different type of emission trading scheme how it works and we were discussing about the clean development mechanism. So, in this session we will discuss the market based instruments specifically that is existing in India one is PAT and second one is REC, but before that we will complete our discussion on clean development mechanism. So, as I told you in the last class that this is a part of the flexibility mechanism given by the Kyoto Protocol and here the flexibility in term of the operational flexibility given to the developed country or the NX1 country that how to achieve or how to meet the emission reduction target. And under CDM under this clean development mechanism the developed country can invest in the developing country, any developing country where the cost of abatement is low and whatever the carbon permits they are generating from the investment in the developing country that can be part of their GHG emission target GHG reduction target or it can be their compliance with their GHG reduction target. Now, the what happens in this clean development mechanism it allow the government and the private entity in the developed country to implement the emission reduction project in developing country receive credit in the form of the certified emission reduction that is CERs which they may use to meet their national reduction targets. Now, developed country they do this because the cost of reduction or the cost of abatement is low in the developing country. Now, the question comes why developing country allows or why developing country encourages the developed country to invest in their country. So, funds channel through CDM should assist the developing country in term of what in term of their economic, social, environmental and sustainable development objective such as if the reduction project is being happening in the developing country the benefit is clean air, clean water, improved land use, social or economic benefit like rural development, employment generation and poverty elevation because this is a source of income and employment opportunity because any investment any investment has the implication for the economic employment and also economic sorry the income. So, here the developing countries they take this funding or they take they comes under this flexibility mechanism because the benefit what they get over here is the economic benefit in term of employment opportunity, income opportunity and also the environmental benefit because if the emission is reduced then that gives the clean air, water and the improved land use. Now, let us see the marketplace instrument which is existing in India. So, in 2011 the national action plan for climate change started under this and they have started eight mission under this national action plan for climate change and national mission for enhanced energy efficiency is one of this eight mission which came under national action plan for climate change and why this is this mission came to promote the market for the energy efficiency, fostering the innovation policies and effective market instrument and its root lie in the overall objective of the energy conservation act 2001. Now, the instrument which comes under this NMEEE is known as PAT this is a market based instrument known as perform achievement trade scheme. This is the flagship program launched by Bureau of Energy Efficiency to reduce the energy consumption and promote the enhanced energy efficiency among the specific energy intensive industry in the country. So, typically in case of traditional cap and trade system the caps are absolutes whereas, in case of this instrument in case of this scheme PAT energy targets are intensity based rather than absolute one. Pilot ETS program which focus on abatement of particulates not CO2 being launched in three states Tamil Nadu, Gujarat and Maharashtra. The first cycle of scheme from 2012 to 2015 they set the mandatory energy efficiency target under 478 facilities means the plants or the factory that are either part of the energy intensive industry or the member of the electricity sector. This facility cover by PAT is called designated consumer or DC. The list of this facility is published annually by Bureau of Energy Efficiency and what is the aim? The aim is to reduce emission by 26 million ton of CO2 equivalent as well as 6.6 million tons of oil equivalent and the first commitment period that is 2011 started but it is 2012 to 2015. Energy efficiency targets are major in term of specific energy consumption for which the baseline are determined by April 2007 to March 2010 average. Now, an installation that fulfills and exceeds SCC target will be able to sell energy saving certificates. So, whatever the if they are whatever the targets they are given if the if they are saving more than that then they can sell the energy saving certificate which is known as the SCART. So, the name of the commodity in this trading scheme is SCART and they can sell if they have achieved more than the energy saving targets given by the regulator. Trading will occur by regulated exchanges platform for trading exchange are designated two power exchange one is IEX and second one is the PXIL. Company that purchase SCARTs would do so in order to achieve compliance obligation and avoid the non-compliance penalty. So, this is what the process for this SCART exchange process that how typically this is being traded in case of the power exchange. So, pilot ETS that is this environmental trading scheme started in February 1st 2011 in three states that is Gujarat and Tamil Nadu and Maharashtra by the then environmental minister Jayaram Ramesh. And it launched by Indian MOE that is Ministry of Environment and Finance letter which become MOE FCC when they incorporated the responsibility for the climate change central pollution control board and relevant state pollution control board. And regulatory framework and technical capacity to implement ETS in India is based on Environmental Protection Act of 1986. Here each state pollution control board would be responsible for the facility coming under their state. Here the they will determine which pollutant to include set caps for the industry facility based on the desired overall pollutant concentration. State regulator will then distribution emission permits to the cap facility which have the option either complying to the caps or selling the extra permits or buying from the market the amount of permit by which they exceed their cap. There are two-fold objectives for this. This is the cost effective method for the emission limitation and it spurs innovation. Means if you look at if the simple decision point what I was trying to explain in the last class also which one gives you which one is more cost effective whether making changes the process bringing innovation bringing technology will lead to more cost or when you are buying the permits from the market rather the reducing on the own which one will cost more. And whatever the least cost effective that is typically being taken by the company. So, in the cycle one it was applicable to 8 energy intensive sector there are about 478 numbers of DC accounting almost 33 percent of the India's primary energy consumption. Then it is and interestingly in cycle one they over achieved and the whatever is being planned is the targets whatever is being planned is the goal that they over achieved in cycle one. And one of the criticism comes because of because of this over achievement is that possibly whatever the targets given for the energy saving it was much more below the capability of the industry. Then part cycle two which is from 2006 to 2018 and 19 includes three sectors that is petroleum refinery, discum and railways along with the previous eight energy intensive sector of the part cycle one. The aim to achieve an overall energy consumption reduction of 8.869 million metric ton equivalent. Now part cycle three that is from 2017 to 2020 along with all this previous this is they also include 160 new units under it. And they have been given the reduction target of 1.06 million tons of the oil equivalent. Now the second market based instrument what is being used in India is renewable energy credit system that is REC. So, this started in November 2010 and the primary purpose is to promote the renewable energy even in region that have low potential for the renewable power generation. The aim of this mechanism is to contribute significantly to the renewable energy generation goal and this is being outlined by National Action Plan on Climate Change and Energy Act of 2003. Minister of Power regulates this REC mechanism. State regulatory commission SCRC set the targets for the power company to purchase certain percentage of the total power from the renewable sources and the targets what they give is that the renewable purchase obligation standard. So, whatever the certain purchase or certain percentage of the total power which should come from renewable that gives as the renewable purchase obligation standard that is RPR. The cover entity meant trade REC either within or across state. Now here what would be the trading mechanism? So, there is a renewable purchase obligation standard is given to each of the industry. If they are using more of renewable energy beyond the target then they have the surplus standard. The surplus standard they can sell it to the other industry who are using or who are using less renewable energy whatever given in the target. So, cover entity meant trade REC either within or across state to compliant with their RPR profit from the surplus of REC. Each REC represent about one type of the or the cover type of the renewable energy that is solar, wind, small scale hydro, biomass based power, biofuel and municipal waste based power and the purchase of REC treated as corresponding to the quantity of the renewable power. So, the typical example is that if I am buying 25 megawatt of solar of this REC then it will be considered that the industry is using 25 megawatt of solar in their production process. As a result facilities are able to meet their renewable energy targets even if the local climate is not well selected for the renewable energy generation. So, the simple way to understand this is that there is a renewable purchase obligation is given to the industry. If they cannot generate then or if they cannot generate cannot using their production process they need to buy the equivalent amount of the renewable purchase or renewable usage in the form of the REC and if they are buying the permit then that would be considered that the part of their consumption of the in the form of the renewable energy. This is also some this is also traded through the power exchange that is IX and PXIL and the floor price the range of the floor price and the ceiling price for this REC will be determined by the CERC that is Central Electricity Regulation Committee. Now, what are the challenges and issues when it comes to market based instrument in India? There is always a political reluctance to create an ATS because there is a fear or there is a apprehension that such policy could hinder the economic development. Then the second challenge when it comes to market based instrument is that there is a need to build its capacity to improve the data collection and supply of trained main power to implement the ATS effectively. Then non-compliance penalty are relatively weak. So, if someone is not complying to the standard typically there is a whatever the penalty is given that those are very weak. So, they could fail to incentivize the compliance and PAT is the first kind of it kinds its market system and enhancing the energy efficiency in the developing world. So, it will take some time to set and that one good thing is that already the third cycle is there for the PAT. Then few other countries especially the developing country have three national market environmental program that is PAT, REC and CDM. They are active with the potential to reduce the GHG, but CDM is no more operational mostly. So, if you look at the market based instrument mostly this is with PAT and REC that is that exist in India. So, in the next session we will try to see what are the different environmental laws related to the which contributes to the sustainability and also little bit about the disclosure regulation in order to understand what are the changes that has happened over a period of time for the disclosure regulation. Thank you.