India's Carbon Credit Trading Scheme

The Carbon Credit Trading Scheme (CCTS) is India's compliance carbon market. Large plants in energy-intensive sectors have legally binding targets for their greenhouse gas emissions per unit of output. A plant that beats its target earns Carbon Credit Certificates (CCCs), which it can sell. A plant that misses its target must buy and surrender certificates to cover the gap.

The CCTS is a baseline-and-credit system, not a cap-and-trade system. There is 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.

For analysts, the CCTS turns emissions intensity into a profit and loss item for covered companies in cement, aluminium, refining, steel and other sectors. Efficient plants gain a new source of income; inefficient ones face a new cost.

Legal basis and institutions

The CCTS was notified in June 2023 under the Energy Conservation (Amendment) Act, 2022, and amended in December 2023 to add an offset mechanism.

Targets

• Targets are set for each plant as tonnes of CO2 equivalent per tonne of equivalent product, using FY 2023-24 as the baseline.
• They 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.

Sectors and timeline

Fertilisers are also planned. When all nine sectors are in, about 740 entities will be covered.

Trading

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

Penalties

An obligated entity that does not surrender enough certificates faces environmental compensation, reported as twice the average price of CCCs in the trading cycle, plus penalties under the Energy Conservation Act.

The offset mechanism

Entities that are not obligated can register projects under approved methodologies, such as green hydrogen, pumped hydro storage, biogas, industrial energy efficiency and mangrove planting, and earn CCCs. These offset credits cannot be used by obligated entities to meet their targets in the main compliance mechanism.