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An Introduction to India’s Perform-Achieve and Trade (PAT) mechanism

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The National Action Plan on Climate Change (NAPCC), released by the Prime Minister on 30th June 2008, recognizes the need to maintain a high growth rate for increasing the living standards of the vast majority of people and reducing their vulnerability to adverse impacts of climate change, NAPCC Action Plan Outlines 8 Missions including National Mission on Enhanced Energy Efficiency (NMEEE), PAT scheme is one of the 4 ambitious missions of NMEEE .NMEEE initiatives are as follows:

1. Perform, Achieve, and Trade (PAT), a market-based mechanism to make improvements in energy efficiency in energy-intensive large industries and facilities more cost-effective by certification of energy savings that could be traded

2. Market transformation for energy efficiency (MTEE) by accelerating the shift to energy-efficient appliances in designated sectors through innovative measures that make the products more affordable

3. Energy efficiency financing platform (EEFP), a mechanism to finance DSM programmes (Demand-Side-Management)in all sectors by capturing future energy savings

4. Framework for energy efficient economic development (FEEED), or developing fiscal instruments to promote energy efficiency

So in order to incentivize and promote and energy efficiency, India is about to embark on one of the most ambitious and extensive energy saving initiatives in its history, when the much-anticipated Perform, Achieve, Trade (PAT) scheme becomes operational. The PAT scheme is a trading mechanism designed for high energy consuming industries. It aims to incentivize industrial sectors and units to implement energy efficiency measures and to comply with energy consumption targets set by the regulator (India?s Bureau of Energy Efficiency or BEE). Estimates suggests that if PAT is successful, it alone could help India meet half of its emissions intensity targets announced at Copenhagen, i.e. a reduction of 20-25% reduction by 2020, based on a 2005 baseline.

There are similar trading programs for energy efficiency certificates or credits in a few U.S. states (Connecticut, Pennsylvania, Nevada), and in New South Wales province in Australia, but India?s PAT scheme is the first nationwide effort of its kind anywhere in the world. Its scale and scope are unique, making India a global leader in energy efficiency policy, but at the same time posing design and implementation challenges for this pioneering effort. If successful, PAT could become a valuable model for other countries to adopt for their own energy efficiency programs. In particular, developing countries would have a proven framework to study and incorporate, with the knowledge that emerging economies can achieve energy savings in a cost-effective way that boosts economic growth. Additionally, this could also be a model for future carbon trading schemes in India and other countries.

Eight major sectors of the Indian economy are covered by PAT in its first phase, power, iron and steel, cement , fertilizer, pulp and paper, aluminium, textiles and chlor-alkali. All together, the industrial sectors within the purview of the PAT scheme account for nearly 50% of India?s nationwide energy consumption.

Study suggests that energy consumption across different industrial sectors covered under the PAT scheme is high; industries share a large portion of the overall energy consumption in India, which are operating in an inefficient manner with respect to the international benchmarks.

There is a vast potential for energy saving across the different energy intensive industries in India that are covered under the PAT scheme. And also there is high energy saving potential across 563 designated consumers covered under the PAT scheme, the estimated energy consumption among 563 DC?s of 8 industrial sectors was around 192 million tonnes of oil equivalent with a saving potential of 30 million tonnes of oil equivalent and if we see the overall energy consumption of 8 industrial sectors covered under the PAT scheme it was 306.7 million tonnes of oil equivalent with an energy saving potential of around 44 million tonnes of oil equivalent.

PAT scheme is definitely an attractive scheme it will unlock the market for energy efficiency in India and there is a good market potential for energy saving certificates in India

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Rishi Srivastava


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