India's Carbon Credit Trading Scheme Has Launched
What Every Listed Company Must Do Now?
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Introduction
India's Carbon Credit Trading Scheme has moved from policy to practice. At the Prakriti 2026 conference, the Ministry of Power confirmed that the Carbon Market Portal is live, with the first compliance trading expected by mid-2026.
The scheme is India's first mandatory emissions trading system, and the country is the world's third largest greenhouse gas emitter. For listed companies, the timing matters beyond climate policy: carbon performance now intersects with BRSR disclosure requirements, lender negotiations, and export competitiveness under the EU's Carbon Border Adjustment Mechanism.
This piece explains what changed, which sectors and entities are covered, and the specific steps listed companies in covered sectors should take now.
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How India Got Here: From PAT to CCTS
The legal foundation for the scheme dates to 2022, when Parliament amended the Energy Conservation Act to give the central government authority to establish a carbon market. The Bureau of Energy Efficiency, acting as scheme administrator, formally notified the Carbon Credit Trading Scheme in June 2023, replacing the Perform, Achieve and Trade scheme that had governed industrial energy efficiency since 2012. The shift is significant: PAT measured energy consumption, while CCTS measures actual greenhouse gas emissions intensity, requiring covered entities to track both Scope 1 and Scope 2 emissions using standardised methodologies.
Sector coverage was finalised in phases through 2025 and early 2026. The first four energy intensive sectors, aluminium, cement, chlor-alkali, and pulp and paper, received final emissions intensity targets in October 2025. Five more sectors, petroleum refining, petrochemicals, textiles, iron and steel, and fertiliser, followed by early 2026, bringing the total to nine.
The push has external drivers too. The EU's Carbon Border Adjustment Mechanism began taxing carbon-intensive imports in 2026, giving Indian exporters a reason to build a domestic carbon price before paying one abroad. The scheme also supports India's updated climate targets: a 47 percent reduction in emissions intensity by 2035 and net zero by 2070.
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Inside the Launch: What Changed
What Was Launched
The Ministry of Power confirmed at Prakriti 2026 that India's Carbon Market Portal is operational, with compliance trading of Carbon Credit Certificates expected to begin by mid-2026. A separate voluntary Offset Mechanism, covering categories such as renewable energy, green hydrogen, and afforestation, is already active. Trading will run exclusively through India's power exchanges, supervised by the Central Electricity Regulatory Commission, with the Grid Controller of India operating the central registry.
Coverage and Targets
Nine sectors now carry binding targets, covering approximately 740 industrial entities and around 700 million tonnes of CO2 equivalent, roughly 16 percent of India's total emissions. Targets use FY2024 as the baseline and apply to compliance years FY2026 and FY2027, with reductions back-loaded so that about 40 percent of the cut falls in the first year and 60 percent in the second. Reduction ranges vary by sector: cement faces cuts of roughly 0.85 to 7.6 percent, aluminium 1.9 to 7.06 percent, and pulp and paper up to 15 percent over two years.
How Trading Works
CCTS operates as an intensity-based baseline-and-credit system rather than a hard emissions cap, meaning targets scale with output. Entities that outperform their assigned intensity target earn Carbon Credit Certificates, which they can bank without limit, though borrowing against future credits is not permitted. Entities that fall short must purchase and surrender an equivalent number of CCCs. Early market estimates suggest certificates may trade between Rs 250 and Rs 1,500 per tonne, depending on sectoral supply and demand.
The Penalty Structure
Non-compliance carries a financial penalty set at roughly twice the prevailing CCC market price, which effectively caps how high certificate prices can rise: no rational entity would pay more for a credit than it would for the penalty itself. The structure is designed to make purchasing credits consistently cheaper than ignoring the target altogether.
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What Listed Companies Must Do Now
BRSR and Investor Disclosure
CCTS compliance status will become part of the public record for covered entities. For listed companies, this links directly to BRSR disclosures already mandated by SEBI, and investors, lenders, and customers are expected to factor carbon performance into their assessments going forward.
Immediate Compliance Steps
Companies in covered sectors should confirm whether their specific facilities fall within the notified Phase 1 list, appoint an internal compliance lead, commission a baseline emissions audit through a BEE-accredited verifier, and put a monitoring, reporting, and verification system in place ahead of upcoming reporting deadlines.
What to Watch Next
Industry attention now turns to the first MRV data collection cycle, expected first CCC issuance later in 2026, and whether regulators add a second tranche of sectors such as aviation, ports, or data centres. A price stability mechanism for the market is also reportedly under consideration.
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Conclusion
India's Carbon Credit Trading Scheme has moved from a notified framework to an operating market. For listed companies in the nine covered sectors, emissions intensity targets are now legal obligations rather than future possibilities, and the cost of inaction is built directly into the scheme's penalty structure.
As the first compliance cycle unfolds through 2026, the practical question for listed companies is no longer whether to engage but how quickly their MRV systems, verification partners, and disclosure processes are ready.
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Frequently Asked Questions
What is India's Carbon Credit Trading Scheme?
It is India's first mandatory emissions trading system, requiring covered industrial entities to meet binding greenhouse gas intensity targets.
Which sectors are currently covered under CCTS?
Nine sectors are covered: aluminium, cement, chlor-alkali, pulp and paper, petroleum refining, petrochemicals, textiles, iron and steel, and fertiliser.
How does the CCTS compliance mechanism work?
Entities that beat their assigned emissions intensity target earn tradable Carbon Credit Certificates, while entities that miss it must buy and surrender certificates to cover the shortfall.
What happens if a company misses its emissions intensity target?
It must purchase enough Carbon Credit Certificates to cover the shortfall or pay a penalty set at roughly twice the prevailing certificate price.
How does CCTS affect a listed company's ESG disclosures?
Compliance status becomes part of the public record and feeds directly into the BRSR disclosures that SEBI already requires of listed companies.
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