CCTS (Carbon Credit Trading Scheme)

The CCTS was notified in June 2023 under the Energy Conservation (Amendment) Act, 2022. Plants that beat their targets earn Carbon Credit Certificates; those that miss must buy them. Final targets cover about 490 entities in aluminium, cement, chlor-alkali, pulp and paper, refining, petrochemicals and textiles, with iron and steel in revised draft and fertilisers planned. First trades on power exchanges were expected in October 2026. It also has a voluntary offset mechanism.

Baseline and credit, not cap and trade

The CCTS sets no limit on total emissions. A plant can grow its output, and its total emissions, as long as its emissions per tonne of product fall to the target. That makes it a baseline-and-credit system rather than a cap-and-trade system.

Who runs it

The Bureau of Energy Efficiency administers the scheme and issues the certificates. The Ministry of Environment, Forest and Climate Change notifies the targets, Grid-India runs the registry, and the Central Electricity Regulatory Commission (CERC) regulates trading. A National Steering Committee oversees the whole market.

How the targets work

Each plant has a target in tonnes of CO2 equivalent per tonne of equivalent product, using FY 2023-24 as the baseline. Targets cover direct emissions and electricity-related emissions. The first compliance years are FY 2025-26 and FY 2026-27, with tighter targets in the second year: reported reductions are about 1% to 3% for FY 2025-26 and 2% to 8% for FY 2026-27, depending on the plant.

How trading works

One Carbon Credit Certificate equals one tonne of CO2 equivalent. Certificates trade only on CERC-registered power exchanges (IEX, PXIL and HPX), in monthly sessions, and over-the-counter trading is not allowed at launch. CERC is to set a floor price and a ceiling price before trading begins. As of early October 2026, no certificate had yet traded.

Penalties

A plant that does not surrender enough certificates faces environmental compensation, reported as twice the average certificate price in the trading cycle, plus penalties under the Energy Conservation Act.

What it means for investors

For each covered plant, the gap between actual and target intensity, multiplied by output, gives the number of certificates to buy or sell. Because no market price exists yet, run the numbers at several prices: early analyst estimates have ranged from about ₹250 to ₹1,500 per tonne.

Questions investors ask

Is the CCTS a cap-and-trade scheme? No. It limits emissions per unit of output, not total emissions.

Can offset credits be used to meet a target? No. Credits earned under the voluntary offset mechanism cannot be used by obligated entities to meet their targets in the main compliance mechanism.