India's Carbon Credit Trading Scheme: the compliance mechanism

The Carbon Credit Trading Scheme (CCTS) is India’s domestic carbon market. The Bureau of Energy Efficiency describes it as establishing two mechanisms — a compliance mechanism for named industrial entities and an offset mechanism¹ — and this piece describes the compliance mechanism, the one that carries notified emission intensity targets.

What it is

The Central Government notified the Carbon Credit Trading Scheme, 2023 vide S.O. 2825(E) dated 28th June 2023 under clause (w) of section 14 of the Energy Conservation Act, 2001.² The Bureau of Energy Efficiency records that the power to specify such a scheme was introduced by the Energy Conservation (Amendment) Act, 2022; that the National Steering Committee for the Indian Carbon Market is chaired by the Secretary (Power) and co-chaired by the Secretary, Ministry of Environment, Forest and Climate Change; and that the Bureau itself acts as administrator, developing the trajectory and targets, issuing carbon credit certificates and accrediting carbon verification agencies.¹

Targets themselves are notified separately by the Ministry of Environment, Forest and Climate Change.² The Greenhouse Gases Emission Intensity Target Rules, 2025 (G.S.R. 739(E), 8th October, 2025) are made under sections 3, 6 and 25 of the Environment (Protection) Act, 1986 and take effect on publication in the Gazette.² Rule 2 defines the targets as figures in tCO2e per unit of equivalent output or product, and the compliance year as the financial year specified in column (5) of the Schedule.² The scheme is intensity-based, not a cap: an entity that beats its target earns certificates, one certificate representing one tCO2e.¹

Who it binds

The rules bind obligated entities, and coverage is set by naming them. Each Schedule lists the individual obligated entities — the units named in the Schedules, each with its own baseline and target rather than a company-wide figure.² An entity is in scope when its unit appears in a Schedule.²

The First Schedule, as notified in October, covers named entities in aluminium, cement, chlor-alkali, and pulp and paper.² The Amendment Rules (G.S.R. 25(E), 13th January, 2026) renumbered that Schedule as the First Schedule and inserted a Second Schedule covering aluminium (second aluminium), petroleum refinery, petrochemical and textile entities.³

Iron and steel is not yet covered by a notified Schedule. A draft notification, G.S.R. 517(E) dated 26th June, 2026, proposes a Third Schedule for the sector, open to consideration only after sixty days from publication; it is a draft and not in force.⁴ The draft lists iron and steel obligated entities with a 2023-24 baseline and a target for the compliance year 2026-27 only, leaving the 2025-26 column blank, and invites objections to the Ministry.⁴ Separately, the Bureau names nine sectors for gradual transition from the PAT scheme to the CCTS compliance mechanism — aluminium, chlor-alkali, cement, fertiliser, iron and steel, pulp and paper, petrochemicals, petroleum refinery and textile — with more to be included in future.¹ Being on that list is a statement of intended coverage, not a notified target.

Dates

The First Schedule sets targets for the compliance years 2025-26 and 2026-27 against a 2023-24 baseline, with the 2025-26 targets pro rata for September 2025 to March 2026.² The Second Schedule follows the same structure a quarter later: its 2025-26 targets are pro rata for January 2026 to March 2026, and its 2026-27 target is computed from the revised 2025-26 target.³ The detailed procedure describes the annual target as one point on a three-year trajectory period.⁵

Reporting follows the compliance year. Every obligated entity, within three months of the conclusion of the compliance cycle, submits its verified performance assessment document.⁵

Thresholds

The operative threshold is the entity’s own notified target, expressed in tCO2e per unit of equivalent product against its 2023-24 baseline.² Performance against it converts directly into certificates: the Bureau issues certificates equal to the target minus achieved intensity, multiplied by equivalent product output, while an entity above its target must purchase certificates equal to achieved intensity minus target, multiplied by output; banking is permitted.²

Shortfall has a priced consequence. Where an obligated entity fails to comply, the Central Pollution Control Board shall impose environmental compensation equal to twice the average price at which carbon credit certificates traded during that compliance year’s trading cycle, payable within 90 days, following a hearing.² The average price is determined by the Bureau, non-payment attracts penalty under the Environment (Protection) Act, 1986, and the amounts collected are kept in a separate fund account.² Failing to submit the stipulated documents is not a way out: the shortfall is then computed by treating the entity’s achieved intensity as its baseline.²

Verification standard

Verification of an obligated entity’s greenhouse gas emissions and emission intensity during the compliance years is to be undertaken by an accredited carbon verification (ACV) agency.⁶ An ACV agency shall at minimum meet the requirements of ISO 14065:2020 and is required to hold or obtain ISO 14065 accreditation; provisional accreditation is cancelled if that accreditation is not submitted within one year.⁶ Accreditation is granted by sector scope, and validation and verification may be undertaken only after final accreditation.⁶

The mechanics sit in the detailed procedure. The obligated entity submits a performance assessment document in Form A, duly verified, together with a certificate of verification in Form B given by the ACV agency, which shall conduct at least one site visit; a check-verification process operates on top of that.⁵ Entities register with the Indian Carbon Market Registry within four weeks of the issuance of carbon credit certificates, under the procedure defined by the Central Electricity Regulatory Commission, and certificates are traded over the power exchanges under the same Commission’s procedure.⁵ For indirect emissions from purchased electricity, the grid emission factor applied is the one published by the Central Electricity Authority.⁵

What an organisation on ESGOS can do

An obligated entity, or a supplier to one, can find its listing in the directory and claim it from its profile page, or get listed and attach the evidence the compliance cycle generates: the Form B certificate of verification, the name of the ACV agency and its sector scope, the unit’s notified baseline and target, and its certificate position for the compliance year. Operators in sectors named for future transition can record the same intensity metric in advance of a Schedule entry. The verifiers directory lists accredited verification bodies drawn from national accreditation registers, by standard, including ISO 14065.

Footnotes

1. Carbon Credit Trading Scheme programme page, Bureau of Energy Efficiency. ↩ ↩² ↩³ ↩⁴

2. G.S.R. 739(E) — Greenhouse Gases Emission Intensity Target Rules, Ministry of Environment, Forest and Climate Change. ↩ ↩² ↩³ ↩⁴ ↩⁵ ↩⁶ ↩⁷ ↩⁸ ↩⁹ ↩¹⁰ ↩¹¹ ↩¹² ↩¹³

3. G.S.R. 25(E) — Greenhouse Gases Emission Intensity Target (Amendment) Rules, Ministry of Environment, Forest and Climate Change. ↩ ↩²

4. G.S.R. 517(E) — Draft notification, Greenhouse Gases Emission Intensity Target (Amendment) Rules, iron and steel sector, Ministry of Environment, Forest and Climate Change. ↩ ↩²

5. Detailed Procedure for Compliance Mechanism under CCTS, Bureau of Energy Efficiency. ↩ ↩² ↩³ ↩⁴ ↩⁵

6. Accreditation Procedure and Eligibility Criteria for Accredited Carbon Verification Agency, Bureau of Energy Efficiency. ↩ ↩² ↩³