The Carbon Credit Trading Scheme Benefits

Making Renewable Energy a Reality

CCTS Driving India’s Green Transition

A Robust Framework for Emissions Reduction and Sustainable Growth.

The CCTS, established under the Energy Conservation (Amendment) Act, 2022, creates the Indian Carbon Market (ICM) and issues Carbon Credit Certificates (CCCs). It incentivizes industries to adopt cleaner technologies and reduce their carbon footprint through an intensity-based baseline-and-credit system, rewarding overachievement and requiring compensation for shortfalls.

The Compliance Mechanism Mandating a Cleaner Industry

Setting Ambitious Targets for Energy-Intensive Sectors.

This core mechanism sets mandatory emissions intensity targets for ~800 entities across nine energy-intensive industries (e.g., aluminium, cement, iron & steel, textiles). Transitioning from the PAT scheme, it ensures structured decarbonization with six-year targets and annual compliance checks for direct and indirect emissions.

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The Voluntary Crediting Mechanism Expanding Climate Action

Empowering All to Contribute to India’s Net Zero Goals.

The CCTS also features a voluntary mechanism for non-covered entities. They can register projects that reduce or remove GHG emissions to earn and trade CCCs. This expands climate action, mobilizes private capital, and boosts market liquidity for a comprehensive decarbonization approach.

Market Operations & Trading A Transparent and Regulated Platform

Facilitating Efficient Carbon Credit Transactions.

The Indian Carbon Market ensures transparent CCC trading. Issued by the Bureau of Energy Efficiency (BEE), certificates are traded exclusively on regulated power exchanges under the Central Electricity Regulatory Commission (CERC). This central system ensures fair pricing and robust oversight, building trust among participants.

Robust MRV Framework Ensuring Credibility and Accountability

Precision in Monitoring, Reporting, and Verification of Emissions.

The CCTS’s integrity relies on a stringent MRV framework. Covered entities must meticulously monitor emissions and submit verified GHG reports to the BEE. Accredited agencies rigorously check these reports, ensuring accuracy and transparency in every step of the emissions reduction journey, fostering confidence in carbon credit value.

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India’s Climate Vision: Our Path to Net Zero

Aligning Economic Growth with Global Environmental Commitments.

The CCTS is vital to India’s NDCs: reducing emissions intensity by 45% (2005 levels) by 2030 and achieving Net Zero by 2070. It provides a powerful economic incentive for industries to innovate towards a low-carbon future, proving environmental responsibility and economic prosperity can coexist.

About the CCTS

The CCTS is a market-based mechanism established under the Energy Conservation (Amendment) Act, 2022. This legislative framework provides the legal basis for the establishment of the Indian Carbon Market (ICM) and the issuance of Carbon Credit Certificates (CCCs). The scheme aims to incentivize industries to adopt cleaner technologies, enhance energy efficiency, and reduce their carbon footprint.

The CCTS operates as an intensity-based baseline-and-credit system. This means that covered entities are assigned emission intensity targets (tCO₂e per unit of product). Those who overachieve their targets earn valuable CCCs, while those who fall short must purchase certificates to comply. This system promotes continuous improvement in emission performance.

Regulatory Framework & Governance

The CCTS is a collaborative effort involving multiple key government bodies, ensuring robust oversight and effective implementation:

  • Ministry of Environment, Forest and Climate Change (MoEFCC): Responsible for national climate strategy and formally designating covered entities and their GHG emission targets.
  • Ministry of Power (MoP): Oversees national energy policy and the broader national carbon market.
  • Bureau of Energy Efficiency (BEE): The primary administrator of the CCTS. The BEE identifies relevant sectors, develops emission trajectories and targets, issues CCCs, and builds the necessary IT infrastructure for the market.
  • National Steering Committee for the Indian Carbon Market (NSCICM): Tasked with overseeing the overall ICM framework and providing strategic guidance.
  • Grid Controller of India (GCI): Serves as the national registry operator for the CCTS, managing the tracking and recording of CCCs.
  • Central Electricity Regulatory Commission (CERC): Acts as the regulator for all trading activities on the power exchanges, ensuring market oversight and preventing fraud.

Scheme Design & Key Features

Compliance Mechanism

  • Target Setting: Covered entities receive a mandatory emissions intensity target for a six-year trajectory period, notified by the MoEFCC. New targets are announced every three years to facilitate long-term planning.

  • Covered Entities: Initially, the compliance mechanism covers approximately 800 entities from nine energy-intensive industrial sectors: aluminium, chlor-alkali processes, cement, fertilizer, iron and steel, pulp and paper, petrochemicals, petroleum refining, and textiles. These entities are transitioned from the existing Perform, Achieve and Trade (PAT) scheme.

  • Emissions Scope: The CCTS adopts a “gate-to-gate” approach, including direct emissions (Scope 1) and indirect emissions from electricity and heat consumption (Scope 2). Select Scope 3 emissions (import/export of intermediary products) are also considered. The scheme initially covers CO_2 and perfluorocarbons (PFCs).

  • Compliance Period: Annual.

  • Banking & Borrowing: Unlimited banking of CCCs is permitted for future compliance or sale. Borrowing is not allowed.

Voluntary Crediting Mechanism

Complementing the compliance market, the CCTS includes a voluntary domestic crediting mechanism. This allows non-covered entities to register eligible projects for GHG emission reduction, removal, or avoidance, and receive CCCs. This mechanism aims to incentivize broader emission reductions and enhance market liquidity.

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  • Allowance Allocation: CCCs are issued by the BEE to entities that overachieve their GHG emissions intensity targets.

  • Trading Platform: CCCs are traded exclusively through the country’s power exchanges, under the regulation of the CERC. Over-the-counter (OTC) trading is not permitted in the initial stage.

  • Legal Status of CCCs: Initially, CCCs are not considered financial instruments.

  • Market Participation: Both compliance entities (obligated) and non-covered entities (voluntary) can register on the national registry and participate in trading.

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Monitoring, Reporting, & Verification (MRV)

A robust MRV framework ensures the integrity and credibility of the CCTS:

Monitoring

Covered entities must continuously measure emissions at the source or track aggregate fuel/material quantities, adjusting for stock changes.

Reporting

A verified GHG emissions report and proforma must be submitted to the BEE and State Designated Agency within four months after the compliance year ends. This report includes detailed information on operations, emissions data, and reduction measures.

Verification

Reports must be verified by BEE-accredited carbon verification agencies to ensure compliance with set targets.

Compliance & Penalties

Entities that fail to meet their annual emissions targets are required to surrender a corresponding number of CCCs to cover the excess emissions. Penalties are applicable for non-compliance with these obligations. The baseline emissions for the first phase are determined using 2023-2024 emissions data.

India’s Climate Goals

The CCTS is a cornerstone of India’s commitment to its updated Nationally Determined Contributions (NDCs):

  • By 2030: Reduce emissions intensity by 45% below 2005 levels.

  • By 2070: Achieve Net Zero emissions.

Contact & Resources

For further information and official documents, please refer to the publications by the Ministry of Environment, Forest and Climate Change (MoEFCC), Ministry of Power (MoP), and the Bureau of Energy Efficiency (BEE).

  • Energy Conservation Act (2001)
  • Energy Conservation (Amendment) Bill (2022)
  • Carbon Credit Trading Scheme (2023)
  • Detailed Procedure for Compliance Mechanism under CCTS (2024)
  • The Environment Protection Act (1986)