India’s Carbon Credit Trading Scheme: The First Compliance Period
The Bureau of Energy Efficiency (BEE) has notified the Carbon Credit Trading Scheme (CCTS) framework under the Energy Conservation (Amendment) Act, 2022. The first compliance period commences in FY 2026-27, marking India’s entry into mandatory carbon pricing for energy-intensive industries.
Who Is Obligated?
CCTS applies to designated consumers under the Energy Conservation Act — large energy-consuming industrial facilities across sectors including:
- Cement
- Iron and steel
- Aluminium
- Pulp and paper
- Chlor-alkali
- Petrochemicals
- Fertilisers
- Thermal power generation
- Railways and other designated sectors
The scheme uses an intensity-based approach: obligated entities receive emissions intensity targets (tonnes CO2e per unit of output) rather than absolute caps. This accommodates India’s development trajectory while incentivising efficiency improvement.
How Target-Setting Works
BEE establishes sectoral baselines derived from the Perform, Achieve and Trade (PAT) programme’s energy intensity data, augmented with GHG conversion factors. Individual facilities receive targets based on their product type, capacity, and fuel mix. Facilities that outperform their targets earn tradeable carbon credits; those that exceed their allocation must purchase credits on a regulated exchange or face penalties.
The CBAM Connection
For Indian exporters to the EU, CCTS has a strategically important interaction with the EU Carbon Border Adjustment Mechanism. Under CBAM regulations, carbon costs demonstrably paid under a domestic carbon pricing mechanism may be claimed as an adjustment against CBAM certificate obligations. This means that Indian steel, cement, and aluminium exporters who comply with CCTS and can document the effective carbon price paid may reduce their CBAM exposure on exports to Europe.
This creates a powerful compliance incentive: CCTS participation is not only a domestic regulatory requirement but also a mechanism for reducing international trade costs under CBAM.
Trading Mechanism
The carbon credit exchange will operate under SEBI oversight, with credits traded on a designated platform. The trading mechanism is designed to ensure price discovery, liquidity, and transparency. BEE will issue credits to overachieving facilities after verification, and deficit facilities will purchase credits to meet their compliance obligations.
Practical Steps for Obligated Entities
- GHG inventory: Develop a facility-level GHG inventory under ISO 14064-1, covering all sources relevant to CCTS scope
- Baseline assessment: Understand your current emissions intensity relative to the sectoral baseline that BEE will use for target-setting
- Monitoring plan: Establish continuous emissions monitoring or develop a robust calculation methodology with supporting evidence
- Verification readiness: CCTS compliance will require third-party verification of emissions data. Engage with accredited verifiers early.
- CBAM documentation: If you export to the EU, establish documentation systems that can demonstrate the effective carbon price paid under CCTS for CBAM adjustment claims
RSustain’s CCTS Advisory
RSustain provides GHG inventory development, emissions intensity benchmarking, and CCTS compliance advisory for obligated entities. As an AA1000-licensed assurance provider with GHG verification expertise under ISO 14064, we support the full compliance cycle from baseline assessment through verification-ready reporting.