(Adds details, quotes)
By Krittivas Mukherjee
NEW DELHI, Sept 7 (Reuters) - India hopes to set up by December next year energy efficiency targets for more than 700 industrial units, which account for 40 percent of India's fossil fuel use, the country's head of energy efficiency said on Monday.
Energy efficiency is a focus in India's climate change policy and setting targets for energy-intensive industries marks a step towards initiating a national trading scheme centred on energy efficiency certificates.
Prime Minister Manmohan Singh approved the national energy efficiency plan last month. The program could help India save about five percent of its annual use of fossil fuel by 2015.
The scheme is among a number of emissions reduction measures India has announced that could bolster the nation's position ahead of a U.N. gathering in Copenhagen at the end of this year aimed at trying to win agreement on a broader pact to fight climate change.
Ajay Mathur, director-general of the Bureau of Energy Efficiency, said 714 energy-intensive industrial operations had been identified from nine sectors, including power and cement, which would be measured on efficient use of energy.
"All industrial units within a particular energy efficiency band will get the same percentage reduction target," said Mathur, who is one of India's top climate change negotiators.
For instance, the more efficient industrial plants would be assigned a smaller improvement target while less energy efficient operations would be given a tougher target.
"That way the best and the worst both have to improve," Mathur told Reuters in an interview for Reuters global climate change and alternative energy summit.
"Targets will be based on the ideal that the marginal cost of meeting the target is the same for all 714 units."
Those that failed to meet the targets could be fined.
The target setting will eventually lead to the creation of a market-based mechanism that would allow businesses using more energy than stipulated to compensate by buying energy certificates from those using less energy.
Mathur said amendments to existing laws are to be introduced in November to enable the trading of energy efficiency certificates and also put in place stricter fines for those companies that neither meet the targets nor buy the certificates.
Most firms in India, Asia's third-largest economy and the fourth-largest emitter of planet-warming carbon dioxide, have yet to plan for the impact of climate change and do not measure emissions or have deadlines to curb them, according to studies.
India's top firms also face little stakeholder pressure to combat climate change with only about 40 percent of major firms setting voluntary carbon emission reduction goals, according to a survey of chief executives by KPMG consultants last year.
Mathur said the energy efficiency market in India was worth about $15 billion which could generate energy saving of up to two percent of the country's total energy use now.
India is also making energy efficiency ratings a must for energy-intensive electric appliances, including air conditioners, distribution transformers and refrigerators, from next year.
India's greenhouse gas emissions are expected to jump from less than 1.5 billion tonnes at present to somewhere between 4 billion tonnes and 7.3 billion tonnes in 2031, but the per-capita emissions would still be half the global average, a government-backed report said last week.
Per-capita emissions are estimated to rise from about 1.2 tonnes now to 2.1 tonnes by 2020 and 3.5 tonnes by 2030, still below the current global average. (Editing by Alistair Scrutton and David Fogarty)