Carbon Credits As Assets Under The Insolvency And Bankruptcy Code, 2016: A Legal And Valuation Analysis
- IJLLR Journal
- 4 days ago
- 1 min read
Archit Chatterjee, KIIT School of Law
ABSTRACT
The Insolvency and Bankruptcy Code of India 2016 was made for a world where businesses had plants, receivables and land. It was not made for a world where a company’s balance sheet would include certificate that says they did not release a certain amount of carbon dioxide into the air but this time has come. The Carbon Credit Trading Scheme, 2023 notifies under section 14(w) of Energy Conservation Act, 1999 has created a market where companies can buy and sell these certificates called Carbon Credit Certificates. Now companies in industries like steel, cement, power and many more have to buy these certificates to comply with the rules.
When one of these companies goes bankrupt what happens to these carbon credits? Do they become part of the assets that the person in charge of resolving the bankruptcy gets to control or are they something that disappears when the company is no longer compliant? This article argues that carbon credits should be considered property under the Insolvency and Bankruptcy Code forming a part of the liquidation estate. One of the main challenges is its valuation, that is how much they are worth. The Code was made with the idea that assets would have ownership and a big market but carbon credits do not have any of these characteristics. The article looks at what the law says, how other countries deal with issues and how to value these contingent intangibles in the future. It suggests a way to deal with carbon credits when a company is going bankrupt and ways to include it in the procedural doctrine.
