India CARBON Markets

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The Carbon Credit Trading Scheme (CCTS) is India’s national compliance carbon market introduced under the Energy Conservation (Amendment) Act, 2022.
It sets facility-level greenhouse gas emissions intensity (GEI) benchmarks for covered industrial entities and requires annual compliance against those benchmarks.

Facilities that outperform their benchmark generate tradable Carbon Credit Certificates (CCCs).
Facilities that underperform must purchase and surrender CCCs to meet their compliance obligation.

CCTS initially covers India’s most energy- and emissions-intensive sectors, including:

• Cement
• Aluminium (primary and secondary)
• Iron and steel
• Chlor-alkali
• Pulp and paper
• Petroleum refining
• Petrochemical crackers
• Textiles
• Fertilisers (to be phased in)

Coverage is determined at the facility level, based on sector classification and notified GEI benchmarks by the Bureau of Energy Efficiency (BEE).

CCTS is an intensity-based system, not an absolute emissions cap.

Obligations are based on emissions per unit of output (GEI), not total emissions.
This means:

• Total emissions can still rise if production grows
• Compliance depends on relative performance, not absolute reductions
• Production growth, benchmark tightening, and technology choices jointly determine compliance costs

A Carbon Credit Certificate (CCC) represents one tonne of CO₂e reduced or avoided relative to a facility’s GEI benchmark.

CCCs can be:

• Issued to outperforming facilities
• Traded on the national registry
• Banked for future years
• Surrendered for compliance

CCCs are the core compliance instrument under CCTS.

The first compliance phase begins in FY 2025–26, with:

• Benchmarks becoming effective from the date of official notification
• Partial-year treatment for sectors notified in October 2025 and January 2026
• Full-year compliance from FY 2026–27 onward

This creates a short transition period, followed by tightening benchmarks over time.

Each facility must report annually:

• Verified greenhouse gas emissions
• Verified production output

Actual GEI = Emissions / Output

If actual GEI is:

• Lower than the benchmark → facility generates CCCs
• Higher than the benchmark → facility must purchase and surrender CCCs equal to the excess

Non-compliance results in:

• Mandatory surrender of CCCs
• Environmental compensation penalties linked to average market prices
• Potential regulatory enforcement action

Because penalties are linked to market prices, compliance risk increases sharply in a tight market

Prices will be determined by:

• Supply and demand of CCCs
• Benchmark tightening
• Sectoral deficits and surpluses
• Banking and procurement behaviour

Early prices are expected to be modest, but prices are likely to rise structurally as the market tightens over time.

For exporters to the European Union, CCTS may:

• Reduce embedded emissions through intensity improvements
• Provide a domestic carbon price signal
• Potentially offset part of CBAM obligations, subject to EU recognition

However, recognition of intensity-based carbon prices under CBAM remains uncertain, making proactive management critical.

Yes.

Facilities may:

• Bank surplus CCCs for future compliance years
• Use early surpluses to hedge future tightening
• Trade CCCs across compliance periods, subject to registry rules

Banking is expected to be a key risk-management tool under CCTS.

Covered entities must maintain:

• Annual emissions inventories
• Production data by product line
• GEI calculations by facility
• Verification and audit documentation aligned with BEE requirements

CCTS requires consistent, audit-ready, facility-level data management across multiple year

Effective preparation includes:

• Understanding multi-year compliance exposure
• Forecasting surplus or deficit positions
• Identifying lowest-cost abatement options
• Designing credit banking and procurement strategies
• Integrating CCTS with capital planning and CBAM exposure

CCTS should be treated as a long-term financial and operational strategy, not a one-year reporting exercise.

Climate Decode provides an integrated platform for:

• CCTS reporting and GEI tracking
• Multi-year compliance forecasting
• CCC banking, procurement, and hedging
• Decarbonisation pathway modelling
• Capital sequencing and cost optimisation

All workflows are managed through a single system built specifically for CCTS.

The first step is to evaluate:

• Your current GEI vs benchmark
• Production growth plans
• Likely multi-year surplus or deficit position
• Expected carbon cost exposure