Perform, Achieve and Trade: PAT Mechanism Targeting Efficiencies

Background

Arguments are ongoing among developed and developing countries on the carbon emission caps and responsibilities thereof. One side gives reason that developing countries are the most carbon emitting countries, as such, and there has to be their responsibility to bring back the carbon levels to mutually agreed levels. On the other hand, developing countries justify their stand by saying that developed countries have more carbon emitting intensities (per capita carbon emissions), in addition, control on carbon emissions by employing costly technologies will hamper the growth of these countries and will benefit the technology sourcing countries.

In the long run, prior emissions of developed countries may not justify the ungoverned carbon emission by developing countries. Thus, developing countries in the leadership of India have put forward another model, where targets are to be set for the increasing efficiencies or reducing the Specific Energy Consumption, which ultimately will reduce the carbon emissions, instead of targeting the carbon emissions, directly. This approach will encourage the industries or energy intensive units to enhance the efficiencies and reducing carbon emissions without hindering development opportunities.

Perform, Achieve and Trade

Perform, Achieve and Trade or PAT, is a country's internal market mechanism for promoting efficiencies. There have been identified Designated Consumers or DCs (energy intensive industries or facilities), which will have to comply with these efficiency targets. During the first, Target setting phase, efficiency targets, in terms of reduction in Specific Energy Consumption, SEC, and compliance period is to be set. These targets will depend on the existing efficiencies of the facilities, thus vary from unit to unit. Transparent mechanism will ensure that no negotiations happen during this step. Durationof one PAT cycle has been identified as three years. During this period, the DC has to make effort and comply to achieve the set targets. In case, the unit over-performs and reduces the SEC to the limit below the target, they will be issues bankable and marketable Energy Saving Certificates (ESCerts). On the other hand, if the unit, under performs to achieve its set targets, it either has to pay penalties or to purchase the ESCerts from the market, which would be controlled by Power Exchanges. Monitoring and verification of energy savings will be conducted by Designated Energy Auditors (DENAs), again through transparent systems.

One Energy Saving Certificate (ESCert) will be equal to reduction of 1 Tonn of Oil equivalent (TOE) and its market prize may vary according to oil prices and other related aspects including market forces.