India notifies emission intensity targets for nine sectors under Carbon Credit Trading Scheme

On 8 October, the government of India notified the final greenhouse gas (GHG) emission intensity targets for the first industrial sectors to be covered under the compliance mechanism of the Carbon Credit Trading Scheme (CCTS), marking a significant step toward operationalizing the country’s domestic carbon market. 

The Ministry of Environment, Forest and Climate Change (MoEFCC) issued emission intensity targets in two phases during 2025. On April 16, 2025, the ministry released draft GHG Emission Intensity Target Rules covering four sectors - aluminium, cement, chlor-alkali, and pulp and paper - encompassing 282 industrial entities. This was followed by a second notification on June 23, 2025, which established targets for five additional sectors: iron and steel, fertilizer, petroleum refining, petrochemicals, and textiles, covering over 460 additional industrial installations. 

Following a period of stakeholder consultation, the final targets for the first four energy‑intensive sectors were officially notified on 8 October 2025. The four sectors now have two‑year emission‑intensity targets, covering 282 plants nationwide. Reduction ranges are approximately 2.8%–7.06% for aluminium, 4.7%–7.6% for cement, 3.3%–11% for chlor‑alkali, and up to 15% for pulp & paper. Targets are back‑loaded: about 40% of the required reduction must be achieved in 2025–26 and the remaining 60% in 2026–27. Final notifications for the remaining five sectors are expected by year‑end. 

Once all nine energy‑intensive sectors are notified, around 740 entities will have legally binding emission intensity targets for the compliance years 2025-26 and 2026-27, using fiscal year 2023-24 as the baseline. The CCTS compliance mechanism is set to initially cover over 700 million tonnes of CO2e, placing India among the world’s largest emissions trading systems. 

Intensity-based baseline-and-credit system

The CCTS operates as an intensity-based baseline-and-credit system, with targets defined as tonnes of CO₂ equivalent per unit of product output. Entities that reduce their GHG emission intensity beyond their assigned targets will be eligible to receive Carbon Credit Certificates (CCCs), which can be traded on power exchanges. Conversely, entities that fail to meet their targets will be required to purchase and surrender an equivalent number of CCCs to ensure compliance.

The scheme applies a gate-to-gate approach covering both direct emissions from fuel combustion and industrial processes (Scope 1) and indirect emissions from electricity and heat consumption (Scope 2). Some Scope 3 emissions, including import and export of intermediary products, will also be considered. The system initially covers CO₂ and perfluorocarbons (PFCs). 

The CCTS builds on India's existing Perform, Achieve and Trade (PAT) scheme - a mandatory energy efficiency program covering more than 1,000 entities from 13 energy-intensive sectors. While PAT focused on energy efficiency, the CCTS directly targets GHG emissions, aligning more closely with India's climate commitments under the Paris Agreement. 

Market infrastructure and implementation timeline 

The Indian Carbon Market, comprising both the CCTS compliance mechanism and the voluntary Offset Mechanism, is expected to be officially launched by mid-2026, according to an announcement by Power Minister Manohar Lal Khattar at the Prakriti 2025 International Conference on Carbon Markets in February 2025. The scheme will be jointly managed by the Ministry of Power, the MoEFCC, and the Bureau of Energy Efficiency (BEE), which serves as the administrator. 

CCCs will be traded through India's power exchanges under the supervision of the Central Electricity Regulatory Commission (CERC), which will provide market oversight and take corrective action to prevent fraud. The Grid Controller of India will operate the registry for the CCTS. Initially, the system will not allow over-the-counter trading; all transactions will take place through regulated exchanges. 

Voluntary offset mechanism 

In parallel with the compliance mechanism, India has also advanced its voluntary offset framework. In March 2025, the BEE released Version 1 of the Detailed Procedure for the Offset Mechanism of the CCTS, and the government approved eight methodologies for the domestic voluntary market. These methodologies cover renewable energy (including hydro and pumped storage), green hydrogen production (through electrolysis and biomass), industrial energy efficiency, landfill methane recovery, mangrove afforestation and reforestation, renewable energy with storage, offshore wind, and compressed biogas. 

The offset mechanism allows non-covered entities to register eligible projects for GHG emission reduction, removal, or avoidance and receive CCCs. This component aims to incentivize emission reductions in sectors outside the compliance market and increase market liquidity. Projects must have a start date no earlier than January 1, 2025. 

Next steps 

The draft emission intensity targets notified in April and June 2025 were subject to public consultation periods. Pending the official notification of targets for the remaining five sectors and the completion of necessary market infrastructure, including registry systems and trading platforms, the CCTS is expected to commence trading operations in 2026. The nine sectors initially covered under the CCTS account for approximately 16% of India's total emissions. 

For more information on the Indian Carbon Credit Trading Scheme, visit the ICAP ETS Map.