India’s Carbon Credit Trading Scheme (CCTS), Latest News

Carbon Credit Trading Scheme (CCTS) Latest News

United Kingdom has recognised India’s Carbon Credit Trading Scheme (CCTS) as an eligible carbon pricing mechanism under its Carbon Border Adjustment Mechanism (CBAM). The move is expected to reduce the carbon-related tax burden on Indian exporters selling eligible goods in the U.K.

Carbon Credit Trading Scheme (CCTS) Key Highlights

• Recognition by the U.K.: The U.K. HM Treasury has included India’s Carbon Credit Trading Scheme (CCTS) in its indicative list of overseas carbon pricing schemes that can qualify for relief under the U.K. CBAM framework.
• Benefit to Indian exporters: U.K. importers of eligible Indian goods can claim carbon price relief for the carbon price already paid on those goods under India’s CCTS, subject to the required evidence and verification.
• Reduction in CBAM liability: The recognition can lower the effective CBAM burden on Indian exports, helping Indian exporters remain more competitive in the U.K. market.
• Avoiding double taxation: The recognition follows the principle that goods should not face double carbon pricing when an eligible carbon price has already been paid in the country of origin.
• Continued India-U.K. cooperation: Both countries will continue discussions on carbon pricing and carbon market design through the U.K.-India Energy Memorandum of Understanding and the Partnership for Market Implementation.
• Relief will depend on actual carbon pricing: The amount of CBAM relief will depend on the effective carbon price paid for the goods under India’s system. U.K. CBAM- liable persons will still have to meet the required verification and documentation rules.
• Recent trade relationship: India and the U.K. implemented a Comprehensive Economic and Trade Partnership on July 15, 2026. Merchandise trade between the two countries was $25.1 billion in 2025-26, while bilateral services trade reached $35.4 billion in 2024.

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What is India’s Carbon Credit Trading Scheme (CCTS)?

• India’s Carbon Credit Trading Scheme (CCTS) is a market-based mechanism introduced to reduce greenhouse gas (GHG) emissions by putting a value on emission reductions and allowing carbon credits to be traded.
• The scheme forms an important part of the Indian Carbon Market (ICM) and aims to encourage industries and other entities to adopt cleaner technologies and reduce their carbon footprint.
• The legal foundation for the carbon market was created through the Energy Conservation (Amendment) Act, 2022. It empowered the Central Government to establish a carbon trading scheme and provide for the issuance of Carbon Credit Certificates (CCCs).
• Under the CCTS, one Carbon Credit Certificate represents one tonne of CO₂ equivalent (tCO₂e) of greenhouse gas emission reduction or removal.
• India is developing a national carbon market framework with an electronic registry and trading platform to make carbon credit transactions more transparent, organised and reliable.

Carbon Credit Trading Scheme (CCTS) Objectives

• The main objective of CCTS is to accelerate the decarbonization of the Indian economy by giving greenhouse gas emission reductions an economic value.
• It encourages industries to adopt energy-efficient processes, renewable energy, cleaner technologies and other low-carbon solutions.
• The scheme supports India’s climate commitments under the Paris Agreement. India revised its NDC in 2022 and committed to reducing the emission intensity of its GDP by 45% by 2030 from the 2005 level.
• CCTS can help bring greater private-sector participation in climate action by creating financial incentives for entities that achieve additional emission reductions.
• The scheme also provides a framework for sectors outside the mandatory compliance system to participate through the voluntary offset mechanism, expanding the scope of domestic carbon reduction activities.
• A well-functioning carbon market can encourage investment in areas such as renewable energy, green hydrogen, industrial efficiency, forestry, waste management and carbon removal technologies.
• India’s experience with market-based schemes such as PAT, Energy Saving Certificates, Renewable Energy Certificates and Clean Development Mechanism projects provides a foundation for developing a larger domestic carbon market.

How Does India’s Carbon Credit Trading Scheme Work?

The working of India’s Carbon Credit Trading Scheme is based on emission-intensity targets, carbon credit generation and trading. It combines mandatory participation for selected industries with voluntary participation through eligible projects.

Compliance Mechanism

• Under the compliance mechanism, the government sets sector-specific GHG emission-intensity targets for obligated industrial entities.
• These targets determine the amount of greenhouse gas emissions allowed in relation to a particular level of production or output.
• Entities that perform better than their prescribed targets by lowering their emission intensity can receive tradable Carbon Credit Certificates.
• Entities that fail to meet their targets may need to purchase and surrender carbon credits to cover the shortfall.
• This creates a financial incentive for industries to improve efficiency, adopt cleaner technologies and reduce their emissions.

Offset Mechanism

• The offset mechanism allows entities outside the mandatory compliance system to voluntarily participate in the carbon market.
• Eligible projects can reduce, remove or avoid GHG emissions and generate carbon credits after meeting the required conditions.
• Projects undergo processes such as validation, monitoring and verification to establish that the claimed emission reductions are genuine.
• The mechanism can encourage climate action in areas such as agriculture, forestry, clean cooking, renewable energy, industrial efficiency and other emission-reduction activities.

Role of Carbon Credit Certificates in India

• Carbon Credit Certificates (CCCs) are the basic tradable units under India’s Carbon Credit Trading Scheme. Each CCC represents one tonne of CO₂ equivalent (tCO₂e) of emission reduction or removal.
• CCCs provide a financial value to verified emission reductions, allowing entities that perform better than their targets to benefit from their additional climate action.
• Under the compliance mechanism, an entity that reduces its emission intensity below the prescribed target may receive CCCs, while an entity that falls short can use purchased certificates to meet its compliance requirement.
• CCCs are issued through the Indian Carbon Market Registry after the required assessment and verification process. They can then be traded through an approved electronic trading platform.
• The system depends on reliable Monitoring, Reporting and Verification (MRV) to ensure that the claimed emission reductions are genuine and to reduce the risks of double counting or inaccurate reporting.
• Carbon Credit Certificates can therefore create a market incentive for emission reduction, while also providing flexibility to entities in meeting their climate-related obligations.

Policy Support for India’s Carbon Credit Trading Scheme

The development of India’s Carbon Credit Trading Scheme is supported by several national laws, missions and programmes aimed at reducing energy consumption and greenhouse gas emissions.

• The Energy Conservation (Amendment) Act, 2022 provides the legal foundation for India’s carbon market and empowers the Central Government to establish the carbon credit framework and issue carbon credit certificates.
• The National Green Hydrogen Mission is supported by the carbon-crediting methodologies approved in March 2025 and aims to produce 5 million metric tonnes (MMT) of green hydrogen annually by 2030.
• The Perform, Achieve and Trade (PAT) scheme, implemented by the Bureau of Energy Efficiency (BEE) since 2012, has helped reduce energy and emission intensity in designated industries by around 15-25% over its lifecycle.
• India also aims to install 500 GW of non-fossil fuel-based electricity capacity by 2030, supporting the country’s broader clean-energy transition.

Government Measures to Strengthen Carbon Market Readiness

India’s carbon market approach also reflects the principle of Common but Differentiated Responsibilities and Respective Capabilities (CBDR-RC), which recognises that countries have different development needs and capacities to address climate change.

• Mission LiFE and the Green Credit Programme encourage sustainable practices and greater public participation in environmental protection.
• The government has established the National Steering Committee for the Indian Carbon Market (NSCICM) to provide overall guidance for the development and functioning of the carbon market.
• The Bureau of Energy Efficiency (BEE), under the Ministry of Power, plays a major role in administering and developing India’s carbon market.
• The government is also working to encourage greater private-sector participation in carbon reduction and clean-technology projects.

Mission LiFE

Mission LiFE (Lifestyle for Environment) is a global movement launched by India to encourage people to adopt more sustainable and environmentally responsible lifestyles.

• It promotes simple behavioural changes such as saving energy, reducing plastic use and adopting waste-reduction practices.
• The mission seeks to influence consumer behaviour, markets and government policies in favour of environmental sustainability.
• Its goals include mobilising 1 billion people globally by 2028 to take individual and collective action for environmental protection.
• It also aims to transform 80% of Indian villages and urban local bodies into green communities and create measurable environmental and climate benefits.

Green Credit Programme

The Green Credit Programme (GCP) was established through the Green Credit Rules, 2023, notified on October 12, 2023, under the Environment (Protection) Act, 1986.

• It provides a voluntary, market-based mechanism to encourage activities such as tree plantation on degraded forest land.
• Forest departments identify suitable degraded land parcels and register them as a dynamic land bank on the GCP portal.
• Government bodies, PSUs, NGOs, companies, philanthropies, societies and individuals can participate through the digital platform.
• Participants undertake plantation activities within two years and maintain the plantations for 10 years.
• Green Credits are awarded based on planted trees and are supported by digital monitoring, field verification and third-party audits.
• The programme aims to expand India’s forest and tree cover, create an inventory of degraded land and reward voluntary environmentally responsible actions.

Institutional Framework and Future of India’s Carbon Credit Trading Scheme

The success of India’s Carbon Credit Trading Scheme depends on a strong institutional structure that can set targets, monitor the market and ensure that carbon credits represent genuine emission reductions.

National Steering Committee for the Indian Carbon Market

The National Steering Committee for the Indian Carbon Market (NSCICM) is the key body responsible for providing overall direction to India’s carbon market.

• It brings together representatives from relevant ministries, state governments and industry experts.
• The committee provides recommendations on the rules, procedures and institutional structure of the Indian carbon market.
• It helps formulate GHG emission-intensity targets for obligated entities.
• It provides guidance on credit issuance, validity, renewal and international trading of carbon credits.
• It can also constitute working groups and monitor the overall functioning of the carbon market.

Bureau of Energy Efficiency

The Bureau of Energy Efficiency (BEE) was established in 2002 under the Energy Conservation Act, 2001 and plays a central role in India’s energy-efficiency and carbon-market framework.

• BEE develops policies, standards and programmes aimed at improving energy efficiency and reducing energy intensity.
• It uses a combination of regulatory and market-based measures to encourage energy conservation.
• Its major areas of work include standards and labelling for appliances, building energy codes, industrial efficiency norms, awareness programmes and capacity building.
• Through these measures, BEE supports India’s broader efforts to reduce energy consumption and greenhouse gas emissions.

Transition from PAT to CCTS

• India’s earlier Perform, Achieve, and Trade (PAT) scheme emphasised energy efficiency improvements in energy-intensive sectors through Energy Saving Certificates (ESCerts).
• The CCTS supersedes PAT, focusing on direct GHG emissions intensity and issuing Carbon Credit Certificates (CCC), each representing 1 tonne of CO₂ equivalent reduced.
• Target sectors (Compliance Mechanism): CCTS mandates participation from eight high-emission sectors: aluminium, cement, pulp & paper, chlor-alkali, iron & steel, textiles, petrochemicals, and refineries. These sectors account for ~16% of India’s total GHG emissions.
• Power sector exclusion: The power sector, which contributes ~40% of India’s total GHG emissions, is currently excluded from the compliance mechanism but may be included in later phases.