The Government of India recently issued a significant gazette notification outlining
comprehensive measures to reduce greenhouse gas emissions across key industrial
sectors. Published on April 16, 2025, the notification establishes the “Greenhouse
Gases Emission Intensity Target Rules, 2025″ under both the Energy Conservation
Act, 2001 and the Environment Protection Act, 1986. The detailed framework
implements the previously announced Carbon Credit Trading Scheme and mandates
specific emission intensity reduction targets for numerous companies in the
aluminum, cement, and pulp and paper industries. Each obligated entity must meet
carefully calculated targets for compliance years 2025-26 and 2026-27, with
provisions to purchase carbon credit certificates from the Indian carbon market if
they fall short. The notification also institutes a robust penalty system—charging
twice the average trading price of carbon credits during the relevant compliance
period—for entities failing to comply. This ambitious initiative represents a concrete
step toward fulfilling India’s climate commitments and advancing its transition to a
lower-carbon economy through market-based mechanisms.
This significant initiative is underpinned by the Carbon Credit Trading Scheme
(CCTS), which establishes a dual framework encompassing both compliance and
offset mechanisms. 4 The compliance mechanism is designed to drive emission
reductions within energy-intensive industries through mandatory targets, while the
offset mechanism aims to incentivize voluntary climate actions across a broader
spectrum of entities. This strategic move is anticipated to play a vital role in India’s
efforts to reduce its greenhouse gas emissions and transition towards greener
industrial practices, while simultaneously aligning with international carbon
regulations and unlocking substantial economic opportunities. 4 However, the
successful implementation of this ambitious framework necessitates addressing key
challenges related to robust monitoring, stringent regulatory frameworks, ensuring
financial sustainability, and achieving alignment with global standards, particularly in
light of the relatively low domestic demand for carbon credits observed in the past.
Background
The global imperative to address climate change has led to increased commitments
from nations worldwide, including India’s ambitious Nationally Determined
Contributions (NDCs). India has pledged to reduce the greenhouse gas (GHG)
emission intensity of its economy by 45% by 2030 compared to 2005 levels,
demonstrating a strong dedication to combating climate change while sustaining
economic growth. 5 Establishing a carbon market in India is a crucial policy instrument
in achieving these targets by placing a price on GHG emissions and thereby
incentivizing their reduction. 6 This market-based approach is expected to facilitate a
cost-effective transition towards a decarbonized economy. India has prior experience
with market-based mechanisms aimed at environmental goals, most notably through
the Perform Achieve and Trade (PAT) scheme, which has achieved significant
energy efficiency improvements resulting in the reduction of over 106 million tonnes
of CO2 emissions since its inception in 2015. 5 Additionally, India has been an active
participant in the Renewable Energy Certificate (REC) market and the Clean
Development Mechanism (CDM) under the Kyoto Protocol, showcasing its early
engagement with carbon markets.
Current Carbon Market Policy and Regulatory Framework in India
The foundation for India’s carbon market is rooted in the Energy Conservation
(Amendment) Act, 2022, which provides the essential legal framework for
establishing the Indian carbon market (ICM) and the overarching Carbon Credit
Trading Scheme (CCTS). 1 This pivotal legislation empowers the Central
Government, in consultation with the Bureau of Energy Efficiency (BEE), to specify
the carbon trading scheme and to authorize designated agencies to issue carbon
credit certificates (CCCs), each representing a reduction or removal of one ton of
CO2 equivalent. 5
The operational details of India’s carbon market are primarily defined under the
Carbon Credit Trading Scheme (CCTS) 2023, a significant policy document
notified by the Ministry of Power with the core aim of establishing effective
mechanisms for reducing greenhouse gas emissions within the Indian economy. 4
The CCTS is structured around two distinct but complementary mechanisms: the
Compliance Mechanism and the Offset Mechanism. 6
The Compliance Mechanism is specifically designed to target obligated entities,
primarily those operating within energy-intensive industries, by setting mandatory
Greenhouse Gas (GHG) emission intensity targets. 5 This system operates on an
intensity-based ‘baseline-and-credit’ principle, where obligated entities are assigned
annual targets for their GHG emissions per unit of output. 13 A key aspect of this
mechanism is the gradual transition of sectors currently regulated under the existing
Perform Achieve and Trade (PAT) scheme into the CCTS compliance framework,
commencing from the fiscal year 2026. Initially, nine energy-intensive sectors will be
included in this transition: aluminium, chlor-alkali processes, cement, fertiliser, iron
and steel, pulp and paper, petrochemicals, petroleum refining, and textiles. 5 To
ensure the credibility and transparency of the compliance mechanism, the Bureau of
Energy Efficiency (BEE) has developed detailed procedures for Measurement,
Reporting, and Verification (MRV), encompassing target setting, emissions
monitoring, reporting and verification processes, and the issuance and trading of
Carbon Certificates.
Complementing the compliance mechanism is the Offset Mechanism, which
provides a framework for non-obligated entities to undertake voluntary projects
aimed at reducing, removing, or avoiding GHG emissions. 5 By meeting the eligibility
criteria established by the BEE, these entities can earn carbon credit certificates for
their climate-friendly actions, thereby incentivizing emission reductions in sectors not
covered under the mandatory compliance mechanism, such as agriculture, forestry,
and waste management. 5 There are also plans to expand the scope of the offset
mechanism to include emerging areas like carbon capture and storage. 5 In a
significant development for the voluntary carbon market, eight new methodologies
have recently been approved, which are expected to enhance the quality and
credibility of carbon offsets and potentially lead to an increase in their prices. 30 This
development also facilitates the international trading of Carbon Credit Certificates
(CCCs) under Article 6.2 of the Paris Agreement, broadening the opportunities for
non-obligated sectors to generate carbon credits. 30 Phase I of the offset mechanism
is proposed to include a wide range of sectors, including energy, industries,
agriculture, waste handling and disposal, forestry, and transport.
The Bureau of Energy Efficiency (BEE) plays a pivotal role as the central
administrator for the CCTS, tasked with the responsibility of institutionalizing the
Indian carbon market. This includes identifying sectors with GHG emission reduction
potential, developing emission intensity trajectories and reduction targets for
obligated entities, managing the issuance of carbon credit certificates, and
overseeing the accreditation of carbon verification agencies.
To provide strategic direction and oversight, the Central Government has constituted
the National Steering Committee for Indian Carbon Market (NSCICM) under the
CCTS. 5 This apex committee, comprising members from various relevant ministries
and organizations, is responsible for guiding the development of the ICM framework,
establishing market rules and regulations, setting GHG emission targets, and
recommending procedures for trading carbon credits outside India.
Objectives and Goals of India’s Carbon Market Policy
The overarching objective of India’s carbon market policy is to significantly contribute
to the decarbonization of the Indian economy by establishing a mechanism for
pricing greenhouse gas emissions through the trading of Carbon Credit Certificates
(CCCs). 5 This initiative is strategically designed to facilitate the achievement of
India’s enhanced Nationally Determined Contributions (NDCs), with a key target of
reducing GHG emission intensity by 45% by 2030 compared to 2005 levels. 6 The
carbon market framework aims to complement and support various entities in their
efforts to meet these ambitious climate goals. 6
A primary goal of the policy is to actively promote the adoption of greener
technologies and sustainable practices across a wide range of sectors by leveraging
financial incentives for sustainability efforts. The market mechanism is intended to
encourage businesses to reduce their emissions by creating financial rewards for
those who achieve emission reductions and costs for those who exceed their
targets.
Furthermore, the establishment of a robust carbon market is crucial for ensuring
compliance with increasingly stringent international carbon regulations, particularly in
the context of the European Union’s Carbon Border Adjustment Mechanism
(CBAM). By incentivizing domestic industries, especially carbon-intensive sectors
like steel and cement, to reduce their emissions, India aims to maintain their export
competitiveness in markets with stringent environmental policies. The introduction of
carbon credits will encourage manufacturers to adopt green energy solutions,
thereby reducing their carbon footprint and enhancing their compliance with EU
regulations.
The policy also seeks to incentivize voluntary climate actions from entities that are
not covered under the mandatory compliance mechanism, thereby tapping into the
broader mitigation potential across various sectors of the economy. This voluntary
participation is crucial for achieving comprehensive emission reductions beyond the
obligated industries.
Strategically, India aims to position itself to capitalize on the burgeoning global
carbon market, with the potential to command a significant share by effectively
implementing its CCTS. This presents a substantial economic opportunity for the
nation. Ultimately, the policy seeks to foster low-carbon markets and support the
overall industrial decarbonization of the Indian economy by assigning a tangible price
to greenhouse gas emissions through the trading of Carbon Credit Certificates.
Mechanisms and Instruments within the Indian Carbon Market
At the heart of India’s carbon market lies the carbon trading scheme, a mechanism
that enables companies to buy and sell carbon credits, each representing an
allowance to emit a specific quantity of greenhouse gases. This market-based
approach is designed to make decarbonization a more economically viable and
efficient process for individual companies.
A significant aspect of the current framework is the ongoing transition from the
Perform Achieve and Trade (PAT) scheme to the compliance mechanism under
the CCTS. The PAT scheme, initiated in 2012, served as a market-based
mechanism focused on enhancing energy efficiency within energy-intensive
industries by setting specific energy consumption reduction targets for designated
consumers. The government has formulated a detailed plan to seamlessly integrate
these energy-intensive sectors and designated consumers into the compliance
mechanism of the CCTS. This gradual integration aims to provide more
comprehensive opportunities for decarbonization within these key industries.
The primary trading instrument within the Indian carbon market is the Carbon Credit
Certificate (CCC). Each CCC represents the successful reduction or removal of one
metric ton of carbon dioxide equivalent (tCO2e) from the atmosphere. Obligated
entities that achieve a GHG emission intensity below their set target will be eligible to
receive these certificates.
The Indian carbon market may also see interaction with existing market-based
instruments like Renewable Energy Certificates (RECs) and Energy Saving
Certificates (ESCerts), particularly within the voluntary market or as potential
offsets. During an initial phase, there is a possibility of allowing ESCerts and RECs
to be traded in the carbon market without requiring conversion, providing a degree of
flexibility during the market’s early stages. However, the optimal strategy for
integrating these existing certificates with the new carbon credit system is still under
consideration.
The compliance mechanism under the CCTS employs an intensity-based target
setting approach, where emission reduction targets are defined in terms of tonnes of
CO2 equivalent per unit of product. This approach aims to decouple emissions
growth from economic expansion, allowing for continued economic development
while pursuing emission reductions.
Effectiveness and Impact of Existing Policies on Emissions Reduction
The Perform Achieve and Trade (PAT) scheme has demonstrated a degree of
effectiveness in its objective of improving energy efficiency within energy-intensive
industries. Since its inception in 2015 until June 2024, the PAT scheme has
facilitated the reduction of over 106 million tonnes of CO2 emissions. This prior
experience underscores India’s capacity to implement market-based mechanisms for
environmental goals.
However, the PAT scheme has also faced several shortcomings that have limited
its overall impact. These include long compliance cycles, targets that were perceived
as lenient, a lack of transparency in data, an oversupply of Energy Saving
Certificates (ESCerts), and limited imposition of penalties for non-compliance. The
oversupply of ESCerts, in particular, led to poor market liquidity and low certificate
prices, diminishing the financial incentive for further energy efficiency
improvements. The lessons learned from these limitations are expected to inform
the design and implementation of the new CCTS regime, aiming to avoid similar
pitfalls.
The newly proposed Carbon Credit Trading Scheme (CCTS) is anticipated to have
a more significant impact on emissions reduction in India. Effective Emissions
Trading Systems (ETS) globally have demonstrated the potential to drive emissions
reductions of up to 7-15% in regulated sectors. The CCTS is expected to
incentivize innovation and the adoption of cleaner technologies across various
sectors by placing a direct price on carbon emissions and monetizing emission
reduction efforts. However, concerns have been raised regarding the initial coverage
of the CCTS, which excludes major polluting sectors such as electricity and
agriculture, potentially limiting its immediate and comprehensive impact on overall
national emissions and air quality improvements. Experts predict that significant
improvements in air quality may not be evident until 2031, as the initial phase of the
system covers only about 30% of the country’s emissions. The ultimate
effectiveness of the CCTS will depend on the ambition of the set targets and the
robustness of its implementation.
Future Developments and Reforms in India’s Carbon Market Policy
The Indian government has set an ambitious timeline for the full operationalization
of its carbon market by mid-2026, with expectations that trading could commence even earlier for certain sectors. Reports suggest that companies in sectors like iron
and steel, cement, petrochemicals, and paper and pulp might begin trading as early
as April 2025.
Future plans include the expansion of the scope of the compliance mechanism to
encompass a wider range of sectors, most notably the inclusion of coal-fired power
generation, which is a significant contributor to India’s emissions. There is also the
potential to expand the coverage to include other greenhouse gases beyond the
initially covered carbon dioxide (CO2) and perfluorocarbons (PFCs).
The Bureau of Energy Efficiency (BEE) is actively developing detailed regulations for
the voluntary offset mechanism, with the trading of Carbon Credit Certificates
(CCCs) generated from voluntary projects expected to begin in 2025. The BEE
anticipates releasing these detailed regulations by the end of 2024.
Looking ahead, there is a strong potential for linking India’s carbon market with
international carbon markets under Article 6 of the Paris Agreement. Key
decisions regarding international participation in the carbon credit market are
expected in 2024. Integration with the global carbon market established at COP 29
could enable India to leverage international partnerships and investments to further
its climate commitments.
In the long term, there is consideration of transitioning towards a complete auction-
based system for the allocation of emission allowances, mirroring the approach
taken by the EU ETS. This shift could help to avoid the pitfalls associated with free
allocation, such as an oversupply of allowances and depressed carbon prices, which
have been observed in other emissions trading schemes.
The regulatory framework for India’s carbon market is continuously being developed
and refined, including the establishment of detailed procedures for the issuance,
validity, and pricing of CCCs, as well as robust mechanisms for market oversight and
the requirements for monitoring, reporting, and verification.
Comparison of India’s Carbon Market Approach with Other Nations
Comparing India’s carbon market approach with that of other major economies
provides valuable context and highlights potential areas for learning and
improvement. The European Union Emissions Trading System (EU ETS), being
the world’s oldest and most developed system, serves as a key point of
comparison. While both systems operate on a cap-and-trade principle, there are
notable differences. The EU ETS covers a broader range of greenhouse gases and
employs a declining absolute cap on emissions across various sectors. In contrast,
India’s CCTS initially focuses on CO2 and PFCs and uses an intensity-based,
bottom-up cap setting mechanism. The sectoral coverage of India’s CCTS is initially
narrower than that of the EU ETS. Regarding allowance allocation, the EU is in the
process of phasing out free allowances in favor of auctioning, a direction that India
may consider in the future to enhance market efficiency and revenue generation.
critical lesson from the EU ETS is the importance of market stability mechanisms.
The EU introduced a Market Stability Reserve (MSR) to manage the oversupply of
allowances and price volatility, an approach that India could consider given the
experience of low carbon prices in its previous schemes.
China’s Emissions Trading Scheme (China ETS), the world’s largest in terms of
emissions regulated, offers another important comparison. China adopted a phased
approach, initially focusing on the power sector before gradually expanding to other
industries. A significant challenge faced by the China ETS has been ensuring data
quality and preventing fraudulent activities , highlighting the need for robust
monitoring and verification systems in India’s CCTS.
The EU’s Carbon Border Adjustment Mechanism (CBAM) is a crucial external
factor influencing India’s carbon market development. CBAM will impose carbon
tariffs on imports based on their carbon intensity, effectively leveling the playing field
between domestic and foreign producers within the EU market. By establishing a
domestic carbon market, India aims to enable its exporters to claim credit for the
carbon price already paid in India, thereby mitigating the potential impact of CBAM
on their competitiveness.
India can also draw lessons from other developing nations that have implemented
carbon markets, such as South Korea’s K-ETS, the first nationwide scheme in East
Asia. Understanding the challenges and successes of these diverse systems can
provide valuable insights for optimizing the design and implementation of India’s
carbon market.
Key Stakeholders in India’s Carbon Market Development and Implementation
The development and implementation of India’s carbon market involve a diverse
group of key stakeholders, each playing a critical role in its establishment and
functioning.
Government Agencies are central to the policy framework. The Bureau of Energy
Efficiency (BEE) serves as the primary administrator, responsible for a wide range
of functions including sector identification, target setting (recommending to the
Ministry of Power), development of the MRV framework, accreditation of carbon
verification agencies, and the issuance of CCCs. The National Steering
Committee for Indian Carbon Market (NSCICM) is the apex committee that
oversees the entire ICM framework, sets rules and regulations, and recommends
emission targets. The Grid Controller of India (GCI) acts as the registry operator,
managing the registration of entities, maintaining accounts of carbon credits,
facilitating transactions, and ensuring data security. The Central Electricity
Regulatory Commission (CERC) regulates the trading activities within the ICM,
approving the rules and bylaws of power exchanges for carbon credit trading and
providing market oversight. The Ministry of Power plays a crucial role in policy
formulation, notifying the CCTS, and recommending emission intensity targets 2 , while the Ministry of Environment, Forest, and Climate Change is responsible for
notifying the final greenhouse gas emission intensity targets.
Industries form the core of the carbon market. Obligated Entities, initially
comprising nine energy-intensive sectors, are mandated to comply with the notified
GHG emission intensity targets. Non-Obligated Entities can voluntarily participate
in the offset mechanism by undertaking projects that reduce or avoid GHG
emissions.
International Organizations also play a significant role. The United Nations
Framework Convention on Climate Change (UNFCCC) and its platforms,
particularly Article 6, provide the overarching framework for international cooperation
on carbon markets. The International Emissions Trading Association (IETA) will
be involved in monitoring the integrity of the verification processes. Voluntary carbon
standards and registries like Gold Standard (GS) and Verra (VCS) provide
frameworks for ensuring the quality and credibility of carbon credits, particularly in
the voluntary market.
Other key stakeholders include Power Exchanges, which will serve as the
electronic trading platforms for carbon credit certificates 6 , and Accredited Carbon
Verification Agencies (ACVAs), which are responsible for independently validating
and verifying the emission reductions or removals claimed by participating entities.
Potential Implications of India’s Carbon Market Policies for the Indian
Economy
The implementation of India’s carbon market policies is expected to have far-
reaching implications for the Indian economy, presenting both significant
opportunities and potential challenges. The development and deployment of green
technologies and the expansion of the renewable energy sector are likely to spur
economic growth and create new job opportunities. The establishment of a
domestic carbon market is projected to stimulate technological advancements and
foster a self-sustaining economic engine.
A robust global carbon market, coupled with India’s proactive policies, has the
potential to attract significant investment inflows into climate mitigation projects
within the country. This influx of capital can further accelerate the adoption of
sustainable practices and technologies.
The carbon market will have a direct impact on the competitiveness of Indian
industries, particularly those in carbon-intensive sectors like steel and cement, in
the face of international regulations such as the EU’s CBAM. By incentivizing these
industries to reduce their carbon emissions, the market can help them remain
competitive in global markets with increasing environmental standards.
Businesses will be incentivized to adopt cleaner and more efficient technologies
to lower their emissions intensity, potentially leading to cost savings and improved operational efficiencies. They may also have the opportunity to generate revenue by
selling any excess carbon credits they accrue.
New regulations and improved credit quality are expected to lead to a potential
increase in domestic carbon credit prices. While this could increase the cost of
compliance for obligated entities, it would also provide a stronger incentive for
undertaking emission reduction projects and attract broader participation in the
market.
The carbon market also presents opportunities for non-obligated sectors, such as
agriculture and forestry, to generate income through the voluntary market by
undertaking projects that result in GHG emission reduction, removal, or avoidance.
However, the establishment and maintenance of a robust regulatory and verification
framework will entail financial costs. Additionally, obligated entities will incur costs
related to monitoring, reporting, and verifying their emissions, and potentially
purchasing carbon credits if they fail to meet their targets.
Micro, Small, and Medium Enterprises (MSMEs) may face particular challenges in
participating in the carbon market due to their limited scale, technical capacity, and
access to finance. Targeted support and aggregation models may be necessary to
ensure their effective inclusion.
The Process of Trading Carbon Credits in India
The trading of Carbon Credit Certificates (CCCs) in India will primarily take place on
designated power exchanges that are registered and approved by the Central
Electricity Regulatory Commission (CERC). This will ensure a transparent and fair
process for price discovery.
A national registry, managed by the Grid Controller of India (GCI), will be central to
the process, responsible for the issuance, tracking, and transfer of CCCs, as well as
maintaining accurate records of all carbon credits issued to participating entities.
The power exchanges will host two distinct market segments: a Compliance market
for obligated entities and an Offset market for non-obligated entities. This
segregation allows for tailored trading rules and participation criteria for each type of
entity.
Obligated entities that successfully reduce their GHG emission intensity below the
prescribed target will be issued CCCs, which will be credited to their accounts in the
CCC Registry. These certificates can then be offered for trading on any of the
approved power exchanges. Conversely, entities that fail to meet their targets will be
required to purchase an equivalent number of CCCs on the power exchanges to
cover their shortfall.
The price of CCCs will be determined through a bidding process on the power
exchanges, potentially within a floor and forbearance price range that will be approved by the CERC based on proposals from the BEE. This mechanism aims to
balance market forces with regulatory oversight to ensure price stability.
Detailed procedures for the registration of entities with the power exchanges,
the rules governing trading activities, and the settlement of transactions will be
established by the CERC and the power exchanges. Entities wishing to trade will
need to register with the power exchange and adhere to the approved trading rules.
To prevent market manipulation, entities will not be allowed to place sale bids
exceeding their CCC holdings, with the registry cross-checking each bid.
The system will also allow for the banking of surplus CCCs, enabling obligated
entities to save any unused certificates from a compliance cycle for use in future
compliance periods or for trading on the market.
Challenges and the Way Forward for India’s Carbon Market
Implementing a successful carbon market in India presents several significant
challenges that need to be addressed to ensure its effectiveness in driving cost-
efficient decarbonization. One key challenge lies in setting ambitious yet realistic
emission reduction targets that truly incentivize industries to move beyond
business-as-usual practices, avoiding the issue of lenient targets that plagued the
PAT scheme.
Ensuring sufficient market liquidity and stable carbon credit prices is crucial for
providing a clear financial incentive for emission reductions. Drawing lessons from
the low prices and oversupply issues experienced with PAT and RECs, the
implementation of mechanisms like market support funds and price ceilings/floors
may be necessary.
Addressing concerns about data quality, transparency, and the potential for
fraud, particularly within smaller industries with informal supply chains, is
paramount. This requires the establishment of stringent and transparent MRV
processes with public visibility to ensure the integrity of the carbon credits being
traded.
The integration of offset credits into the compliance market needs to be carefully
managed to prevent oversupply and ensure additionality, meaning that the emission
reductions achieved through offset projects would not have occurred in the absence
of the carbon market. A phased approach to offset integration, starting with
potentially higher limits for flexibility and gradually reducing them, could be
considered.
Establishing a robust market stability mechanism, potentially learning from the
EU’s successful Market Stability Reserve (MSR) approach, is essential for mitigating
price volatility and fostering long-term confidence in the carbon market.
Ensuring effective monitoring, reporting, and verification (MRV) across India’s
diverse industrial landscape and geographical regions will be a significant undertaking. Leveraging digitization platforms and technology can help to address
logistical challenges and improve the accuracy and efficiency of data collection and
verification.
The successful inclusion of Micro, Small, and Medium Enterprises (MSMEs) in
the carbon market requires tailored approaches, such as simplified participation
processes, pre-financed models, and capacity-building programs, to address their
specific challenges related to resources and technical expertise.
Expanding the sectoral coverage of the compliance mechanism to include major
emitters like the electricity and agriculture sectors is crucial for maximizing the
carbon market’s impact on national emissions. Adopting a phased approach, similar
to China’s initial focus on the power sector, could be a viable strategy.
Strengthening the legal infrastructure and regulatory oversight is essential for
providing a stable and credible foundation for the carbon market and ensuring
alignment with international standards for MRV and market integrity.
Building sufficient capacity and expertise within regulatory bodies like the BEE and
among accredited carbon verification agencies will be critical for the effective
administration and oversight of the complex carbon market framework.
Finally, ensuring the financial sustainability of the carbon market program through
adequate funding for its long-term operation and development is paramount for its
continued success and credibility.
The way forward for India’s carbon market involves aligning domestic mechanisms
with international best practices, particularly those under Article 6 of the Paris
Agreement, to create a well-integrated and effective trading system. Implementing
mechanisms to stabilize prices, such as price ceilings and floors, and providing
targeted incentives will be crucial for boosting domestic demand and ensuring active
participation from industries. Setting ambitious yet achievable targets, coupled with
robust standards, transparent processes, and strong regulatory oversight, will be key
to building and maintaining market trust. 8 Close collaboration between the public and
private sectors, along with providing initial support and developing knowledge
resources, will be essential for translating policies into tangible and impactful
outcomes.
Conclusion
India’s impending launch of its carbon market by 2026 marks a significant step
forward in its commitment to combating climate change and transitioning towards a
low-carbon economy. The Carbon Credit Trading Scheme (CCTS), with its dual
compliance and offset mechanisms, provides a comprehensive framework for
incentivizing emission reductions across various sectors. The potential for this
market to contribute to India’s ambitious climate goals, foster green economic
growth, and enhance the competitiveness of Indian industries in the face of international carbon regulations is substantial. However, realizing this potential
hinges on effectively addressing the challenges related to target setting, market
stability, data integrity, sectoral coverage, and ensuring robust implementation. By
learning from the experiences of other established carbon markets and by
proactively addressing the specific challenges within the Indian context,
policymakers can ensure that India’s carbon market becomes a powerful tool in its
broader climate action strategy and positions the nation as a leader in sustainable
development within the Global South.
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