ARTICLE
9 January 2025

Navigating Regulatory And Compliance Shifts For Global Businesses

J
JSA

Contributor

JSA is a leading national law firm in India with over 600 professionals operating out of 7 offices located in: Ahmedabad, Bengaluru, Chennai, Gurugram, Hyderabad, Mumbai and New Delhi. Our practice is organised along service lines and sector specialisation that provides legal services to top Indian corporates, Fortune 500 companies, multinational banks and financial institutions, governmental and statutory authorities and multilateral and bilateral institutions.
India's ambitious ‘Nationally Determined Contributions' aim to battle and arrest climate change with a strong emphasis on energy transition.
India Energy and Natural Resources

India's ambitious 'Nationally Determined Contributions' aim to battle and arrest climate change with a strong emphasis on energy transition. India's accession to the Paris Agreement in 2015 was a watershed moment when India committed to reducing the emissions intensity of its GDP by 45% by 2030 (from 2005 levels) to ensure that half of its installed electric capacity is non-fossil fuel-based by 2030. At COP 26, India committed to achieving net zero by 2070.

India needs significant patient-finance and suite of technologies to bring changes in consumption and emission patterns, backed by a supportive legal-regulatory-policy environment to facilitate innovations and the transition. In the past, this framework evolved episodically in fits and starts in sync with growing global environmental consciousness and India's accessions to international accords. The window for implementing this change is closing in fast. Businesses need to be conversant with the fast changing business models, technologies, and evolving legal and regulatory frameworks.

To start with, a robust carbon credit trading taxonomy and dispensation must be implemented which secure linkages with international markets to realise value and support the energy transition. It will oblige identified entities in select sectors to comply with emissions standards – obligated entities that fail to achieve the targeted reduction in greenhouse gas emissions shall make up the shortfall by procuring carbon credits from the market, or face significant penalties. The carbon market is anticipated to be a lynchpin of India's climate action and decarbonisation efforts by serving as a tool to incubate and encourage sustainable behaviour.

Additionally, renewable energy consumption targets must be operationalised with respect to identified entities (with targets set until 2030, and allocated amongst wind, hydroelectric power, distributed renewable energy, and other renewable energy sources). This measure has the potential for far-reaching impact if implemented effectively learning lessons from challenges and barriers faced in earlier efforts like renewable purchase obligations and energy efficiency norms hampered by ineffective enforcement.

India has moved the needle on 'Environmental, Social, and Governance' (ESG) initiatives. Efforts are underway to nudge businesses to adopt sustainable practices in their day-to-day functioning to make their operations more sustainable, especially in sectors that are responsible for high emissions (e.g., oil and gas, manufacturing, transportation, and automotive). However, the lack of an overarching taxonomy and defined disincentive regime (institutional or regulatory) is a glaring gap that needs to be addressed forthwith.

Perhaps most significantly, the Indian Supreme Court, building on its own rich history of environmental jurisprudence, while also nodding to global judicial trends, has upheld a citizen's right against the adverse effects of climate change as part of the Fundamental Right to life (MK Ranjitsinh & Ors. vs. Union of India & Ors, W.P.(C) No. 838 of 2019). The court emphasised balance between conservation efforts (for the Great Indian Bustard in this case) with the need to mitigate climate change (through deployment of solar energy, as was in contention before the court). How this decision will translate into pragmatic steps waits to be seen (as earlier verdicts, such the personification of rivers, have shown, high-minded declarations, while laudable, do not necessarily have a concomitant impact on the ground).

The impact and outcome of these legal and regulatory developments on climate action efforts will depend on, firstly, how all the stakeholders, including policy-makers, regulators, and the courts of law, interpret and implement the framework, and, secondly, on their design, implementation, and enforcement, with success being crucially dependent on the ecosystem built to actualise these efforts.

Given India is set firmly on a path of rapid and sustained economic growth in coming years, how businesses react and respond to the clarion call for climate action will be of vital importance. Ideally, businesses must measure success by adopting a holistic approach that prioritises compliance with social and environmental goals, besides the profit margins. In this respect, the governing dispensation has a crucial role to play, by ensuring visibility (e.g., pre-published schedules of green energy auctions), predictability (avoidance of sudden pivots or dramatic shifts in policy with insufficient time to prepare) and uniformity (where like is treated alike) of the legal and regulatory framework.

Originally published by ETEnergyWorld.

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