EV Industry and its Market Potential

2022 has been the most significant one for electric mobility in India, with many EV debuts in the two-, three-, and four-wheeler sectors and an astounding growth rate of 686 percent in the first quarter of FY22. Automotive manufacturers released more models than ever before, with electric two-wheelers seeing a growth of 250 percent year over year. Huge voids in India’s EV infrastructure are quickly being filled.

The year 2022 will go down as the most pivotal in terms of EV policy, with production-linked incentives (PLI) and national and state subsidies being granted to manufacturers and OEMs to aid in the development of a thriving EV ecosystem. Only the states of Gujarat, Maharashtra, Delhi, Meghalaya, Bihar, Haryana, and Chhattisgarh provide financial incentives to both producers and customers in an effort to promote electric mobility. 2022 saw significant funding for renewable energy projects. 

Based on their study, “India Electric Vehicle Ecosystem Market Outlook,” Research and Markets predicts a compound annual growth rate (CAGR) of 43.13 percent for the Indian EV market between 2019 and 2030. The rising interest in EVs in the country, as well as government programmes like the National Electric Mobility Policy 2025, are driving this expansion. The electric vehicle (EV) market in India is expected to mature by the year 2025. The second half of the decade will bring exciting changes, especially in the battery space, which will determine the success of the EV sector, as many brands, from newcomers like Ola Electric to ICE (internal combustion engine) market leaders like Maruti Suzuki, prepare to release their first EV offering.

The market for electric vehicles in India is expanding quickly, creating numerous opportunities for businesses. As the price of gasoline rises, more and more people are opting to switch to electric automobiles. In India, for example, the rise of electric mobility will increase the demand for electricity and facilitate the integration of renewable energy sources into the transportation industry. More than only lowering carbon dioxide emissions and air and noise pollution, electric vehicles have many advantages. Vehicles that generate such large efficiency increases may one day play a crucial role as a renewable energy storage medium. Several new companies have emerged in recent years to meet the rising demand for two-wheelers, four-wheelers, hybrids, and electric vehicles in India’s burgeoning electric vehicle market.

The Indian electric mobility industry is young, with a handful of start-ups that are, for the most part, still in the pre-revenue phase of development. Demand for electric vehicles and batteries will increase as the government strives to transition to an all-electric fleet by 2030. Increased demand for electric vehicles and batteries can be expected as a result of the government’s goal of transitioning to an all-electric fleet by 2030. Large markets like China, Europe, and India all show signs of increasing interest in electric vehicles.

The EV industry has the potential to generate carbon credits due to the electric vehicle’s ability to produce relatively less or zero carbon emissions, as compared to a traditional vehicle that runs on fossil fuels. These ‘less’ carbon emissions, or, reduction in carbon emissions are calculated and divided into 3 sub-categories:

  1. Baseline emissions: These are the emissions that are used in the “Business as usual” scenario i.e carbon emissions that are normally produced by a vehicle that runs on conventional fossil fuels.
  2. Project emissions: In case of EV, project emissions are the emissions generated for creation of electricity that is subsequently used to run the electric vehicles. The charging stations can either be powered up through fossil fuel or renewable energy such as solar power. 
  3. Leakage emissions: A situation where emissions reduced at one place cause emissions to rise at a second place, it is called leakage emissions. In case of EV, there is little to no leakage emission.

Preview of International Carbon Trading Platforms

The Gold Standard: Emission reduction programmes in the Clean Development Mechanism (CDM), the Voluntary Carbon Market, and other climate and development interventions can earn the Gold Standard (GS) certification label by adhering to a set of standards and meeting a set of criteria. Carbon credits created by projects are branded with a quality label by the GS so that they can be purchased and traded by countries with a binding legal commitment under the Kyoto Protocol, businesses, and other organisations in order to meet their carbon offsetting responsibilities. Project developers enlist the help of the Gold Standard to market their Verified Emission Reductions (carbon credits). A minimum cost is set for each type of project to assure their continued viability.

Carbon Trade eXchange (CTX): CTX Is the world’s first digital carbon offsetting exchange for spot price, voluntary carbon credit trading. 

Carbon Market Platform: Under Germany’s G7 leadership in 2015, the Carbon Market Platform was established to facilitate more international cooperation in the creation of efficient, long-term carbon pricing strategies.

United Nations Carbon Offset Platform: The United Nations Carbon Offset Platform is an online marketplace where businesses, organisations, and individuals can buy “units” (carbon credits) to offset their carbon footprints or show their support for climate action. Preview of National Carbon Trading Platforms (IEX- Indian Energy Exchange and PXIL- Power Exchange of India).

Indian Energy Exchange (IEX): The Central Electricity Regulatory Commission oversees the Indian Energy Exchange, a computerised power trading exchange in India.

IEX recently announced setting up a wholly-owned subsidiary, International Carbon Exchange Private Ltd (ICX), to explore business opportunities in the voluntary carbon market. In order to reduce global GHG (greenhouse gas) emissions, ICX will provide a transparent and trustworthy platform where users can purchase and sell voluntary carbon credits at market-based rates. In addition, ICX will help corporations work toward their climate responsibilities. To encourage more capital to flow into sustainable initiatives, the exchange platform will send a clear market signal. This will allow businesses to better allocate their capital expenditures (capex) towards the energy transition. In order to become India’s first carbon-neutral Power Exchange, IEX used market-based tradable instruments to offset its carbon emissions, a process that was completed in December 2022.

Current Scenario of Carbon Credits in India 

On Monday, December 12, despite parliamentarians’ worries over carbon markets and the opposition’s calls to refer the Energy Conservation (Amendment) Bill, 2022 for inspection to a parliamentary committee, the Parliament passed the bill. In order to give the government the authority to create carbon markets in India and to design a carbon credit trading scheme, this bill changes the Energy Conservation Act of 2001.

If we are to keep global warming below 2 degrees Celsius, and ideally below 1.5 degrees Celsius, as stipulated in the legally binding international convention on climate change known as The Paris Agreement, then we must reduce global greenhouse gas (GHG) emissions by 25 to 50 percent during this decade. In accordance with the Paris Agreement of 2015, about 170 nations have so far submitted their NDCs, which they have pledged to review and revise every five years. The term “climate commitments” refers to a country’s “Nationally Determined Contribution,” which is a target for reaching zero emissions. For instance, in order to reach its goal of zero emissions by 2070, India is developing a comprehensive plan. Several countries are turning to carbon markets as a means to achieve their NDCs. According to Article 6 of the Paris Agreement, nations can use international carbon markets to achieve their NDCs. Carbon credit trading could cut the price of adopting NDCs by as much as half, the World Bank believes, saving as much as $250 billion by 2030.

Carbon Markets

A carbon market is a trading system where carbon credits or allowances may be bought and sold and is essentially a method for establishing a price for carbon emissions. In accordance with United Nations guidelines, one carbon credit is equivalent to one tonne of carbon dioxide that is not released into the atmosphere, reduced, or sequestered. Meanwhile, countries’ or governments’ carbon allowances or quotas are set according to their emission reduction goals.

United Nations Development Programme (UNDP) research from 2022 found that 83 percent of countries’ NDCs included plans to use international market mechanisms to cut emissions of greenhouse gases. The United Nations Development Programme stresses that “emission reductions and removals must be real and connected with the country’s NDCs” for carbon markets to be successful. According to the document, “transparency in the institutional and financial infrastructure for carbon market operations” is required.

By enacting the Energy Conservation (Amendment) Bill of 2022, the government of India will have the authority to establish a trading system for carbon credits. Companies and individuals who register with and abide by the plan will get carbon credit certificates from the federal government or an authorised body under the Bill. Certificates for reducing carbon emissions will be tradable. Certificates for reducing carbon emissions would be available for purchase by anyone interested.