If you’re running a facility in aluminum, cement, steel, fertilizers, or any of the other designated energy-intensive sectors, you’ve probably heard the phrase ‘Carbon Credit Trading Scheme’ more times than you can count over the past year. The government notifications have been published. The Bureau of Energy Efficiency has started moving. The first batch of 118 major facilities already has emission intensity targets against their names.
What’s still missing for a lot of companies, though, is a clear picture of what this actually means in practice. Not the policy language. Just a straight answer to: what do I need to do, and when?
This blog is that answer.
What the CCTS Actually Is — and What It Isn’t
India’s Carbon Credit Trading Scheme is not a carbon tax. It’s also not the same as Europe’s Emissions Trading System, where you buy permits upfront to emit. The CCTS works on emission intensity — the target is tonnes of CO2 per tonne of product output, not a hard cap on total emissions.
That’s a meaningful difference for Indian industry. A cement plant that grows production by 20% won’t automatically be penalized, as long as the emissions per tonne of cement produced stays within the assigned target. The scheme is designed to reward efficiency improvements, not punish growth. It’s an intensity-based baseline-and-credit system, and that design reflects India’s development priorities while still moving emissions accountability in the right direction.
The CCTS was formally notified by the Ministry of Power in June 2023 under the Energy Conservation (Amendment) Act, 2022. The International Carbon Action Partnership’s detailed profile of the scheme describes it well: the Bureau of Energy Efficiency (BEE) administers the compliance side, the Grid Controller of India runs the registry, and the Central Electricity Regulatory Commission (CERC) regulates trading. The Central Pollution Control Board enforces penalties for non-compliance.
Nine sectors fall under initial compliance obligations: aluminum, chlor-alkali, cement, fertilizer, iron and steel, pulp and paper, petrochemicals, petroleum refining, and textiles. Roughly 800 facilities above existing PAT (Perform, Achieve and Trade) thresholds are covered. And the transition from PAT to CCTS started in FY2026, using 2023-24 emissions data as the baseline for target-setting.
A 2024 research paper published in Applied Energy (ScienceDirect), ‘Designing a Prospective Carbon Trading Market in India’, makes an interesting observation: evidence from China’s carbon pilots showed that emissions in participating areas dropped by 15.5% compared to non-pilot regions. India is effectively betting on a similar outcome. The paper argues that robust market design — particularly around target-setting and enforcement — will determine whether the CCTS delivers real reductions or just generates paperwork.
The Three Compliance Paths
Every obligated facility gets an emission intensity target expressed as a ratio. At the end of each compliance period, there are three ways you can close the loop:
Achieve your target through operational performance. You improve energy efficiency, switch fuels, or tighten processes. If your actual emission intensity falls below the benchmark, you earn Carbon Credit Certificates (CCCs) that can be banked or sold. Each CCC represents one tonne of CO2 equivalent avoided.
Buy credits from facilities that outperformed. If your intensity exceeds the target, you purchase surplus CCCs through CERC-regulated power exchanges. Analysts are estimating initial prices somewhere in the ₹600–₹1,200 per tonne range, though this will shift as the market matures and price discovery kicks in.
Apply banked certificates from prior PAT cycles. If your plant earned Energy Savings Certificates (ESCerts) under the previous PAT scheme, those can potentially be converted and applied. That’s a one-time runway for companies that have already invested in efficiency improvements. It won’t last forever.
What’s not an option: ignoring the scheme. Non-compliance results in financial penalties from the CPCB, calculated on the gap between your target intensity and actual performance. And with SEBI now requiring Scope 1 and 2 GHG data under BRSR for listed companies, your emissions numbers will get scrutiny on two regulatory fronts simultaneously.
What You Need to Do Right Now
Most obligated companies are still in preparation mode, and there’s a reasonable runway before the first real compliance crunch. But ‘reasonable runway’ isn’t the same as ‘plenty of time.’ Three to six months disappear very fast when you’re building data infrastructure from scratch.
First: register on the Indian Carbon Market portal. The BEE opened registrations for non-obligated entities in June 2025, and the compliance registration process runs in parallel. This is a prerequisite for everything else, and it requires verified facility-level data that not every company has clean and ready. Our GHG Accounting services page has a fuller breakdown of what Scope 1, 2, and 3 emissions actually mean in practice — worth reading if your team is still working through the basics.
Second: run a proper emission intensity baseline using your FY 2023-24 operational data. That’s the base year for CCTS target-setting. Your gap against the assigned benchmark is your financial exposure if nothing changes.
Third: model your abatement options. Fuel switching? Waste heat recovery? Process efficiency gains? These have very different cost-per-tonne profiles, and some will qualify for additional support under India’s Low Carbon Solutions framework. Getting this analysis done before auction windows tighten is a lot better than doing it under pressure.
Fourth: sort out your data infrastructure. The CCTS requires verified emissions data submitted to the registry. That means your measurement, monitoring, and reporting systems need to hold up to third-party scrutiny. Companies still relying on manual tracking or inconsistent metering will struggle, and will likely end up with default values that overstate their actual emissions.
The Voluntary Side: Green Credits and Non-Obligated Entities
The compliance market isn’t the whole story. Alongside the CCTS, the Ministry of Environment’s Green Credit Programme is expanding. Eight project methodologies got formal approval in 2025 — covering mangrove afforestation, green hydrogen, improved cookstoves, and others. The Council on Energy, Environment and Water (CEEW) published a detailed analysis of India’s voluntary carbon offset landscape, noting that India issued 278 million carbon credits in voluntary markets between 2010 and 2022 — 17% of global supply. The voluntary mechanism under CCTS adds a formal domestic channel to that history.
For companies not in the nine obligated sectors, or those that have already hit their compliance targets and want to go further, generating green credits is a genuine revenue opportunity. SEBI has also linked green credit reporting to BRSR disclosures under Principle 6, so there’s now a direct line between green credit activity and what institutional investors see in your annual sustainability report.
How This Connects to Your Broader ESG Obligations
One thing worth flagging: the CCTS and India’s BRSR framework are increasingly pointing at the same underlying data. Scope 3 and value chain disclosure requirements introduced by SEBI for FY 2025-26 require much of the same emissions infrastructure that CCTS compliance demands. We’ve written about this in detail in our blog on ESG Compliance in 2025 — if you haven’t read it yet, it’s worth an hour of your time.
Also worth noting: India’s CCTS development has a direct link to CBAM exposure for exporters. The Columbia University Center on Global Energy Policy published a thoughtful analysis of India’s carbon market design that specifically calls out this connection: a credible domestic carbon price mechanism could provide Indian exporters partial relief from CBAM certificate costs when exporting to the EU. This isn’t guaranteed, but it’s the direction policy is moving.
What Bilancia Can Help With
Working through CCTS compliance requires three things that most internal teams don’t have sitting on the shelf: deep regulatory knowledge, technical capability for credible emission intensity calculations, and systems expertise to build monitoring infrastructure that survives third-party verification. Our Climate Change and Sustainability services are built around exactly this — from baseline assessments and gap analysis to abatement roadmaps and registry registration support.
The carbon market is live. Waiting to see how it plays out isn’t really a strategy anymore. If you want to understand exactly where your facilities stand and what the smart moves are from here, let’s talk. Reach us at general@bilanciaconsulting.co.in or +91-9510144494.
References & Further Reading
- International Carbon Action Partnership — Indian Carbon Credit Trading Scheme Profile (detailed regulatory framework) — icapcarbonaction.com
- Jain, Deb & Levitt (2024), Columbia University CGEP — ‘Lessons for Structuring India’s Carbon Market to Support a Cost-Efficient Energy Transition’ — energypolicy.columbia.edu
- ScienceDirect, Applied Energy (2025) — ‘Designing a Prospective Carbon Trading Market in India: Key Properties, Enabling Features and Linkages’ — sciencedirect.com
- CEEW (2025) — ‘Voluntary Carbon Offset Mechanism and Challenges in India’s Carbon Credit Trading Scheme Market’ — ceew.in
- IEA Policy Profile — Carbon Credit Trading Scheme 2023 (official notification summary) — iea.org