The Union Ministry of Environment, Forest and Climate Change has released a draft notification outlining Greenhouse Gas Emission Intensity (GEI) targets for industries, under the framework of India’s developing carbon credit trading scheme. The targets apply to the financial years 2025–26 and 2026–27 and indicate the government’s intent to operationalise the carbon market within this timeframe.
Notified in 2023 under the Energy Conservation Act, 2001, the Carbon Credit Trading Scheme defines the structure of the Indian Carbon Market (ICM), which facilitates the issuance and trading of carbon credit certificates to reduce, remove, or avoid greenhouse gas emissions.
The draft GEI targets cover a wide range of industries. Specifically, they have been issued for three companies in the aluminium sector, 253 in iron and steel, 21 in petroleum refining, 11 in petrochemicals, 11 in the naphtha segment, and 173 spinning and textile units, all of which have registered under the scheme.
As per the draft notification, each obligated entity must meet the specified GEI target in the relevant compliance year. If a company fails to meet its target, it may purchase carbon credit certificates from the Indian Carbon Market to cover the shortfall. The Bureau of Energy Efficiency (BEE) will calculate these targets and monitor compliance.
The notification also includes provisions for penalties. Should an entity fail to comply with its GEI target or neglect to submit an adequate number of carbon credit certificates, the Central Pollution Control Board (CPCB) will impose an Environmental Compensation. This compensation will be twice the average market price of carbon credit certificates traded during that compliance year, with BEE responsible for determining the average price.
In a 2023 report, BEE noted that India has been at the forefront of global climate efforts through its enhanced Nationally Determined Contributions (NDCs). It emphasized that to facilitate these commitments, the government launched the Indian Carbon Market as a unified mechanism to mobilize new mitigation opportunities by generating demand for emission reduction credits from both private and public entities.
BEE further stated that creating a national-level carbon market, instead of multiple sector-specific mechanisms, would reduce transaction costs, improve liquidity, enhance shared understanding, support targeted capacity building, and streamline accounting and verification procedures.
Commenting on the latest development, Vaibhav Chaturvedi, Senior Fellow at the Council on Energy, Environment and Water (CEEW), said that with the recent inclusion of GEI targets for four additional sectors, India is moving closer to making its carbon market fully functional. He added that while this mechanism is likely to be effective for cost-efficient industrial decarbonisation, the government should now begin evaluating the inclusion of the power sector—currently outside the scheme. According to Chaturvedi, if issues related to power prices, discom revenues, and coal capacity can be addressed to ensure affordability and supply reliability, the inclusion of the power sector should be the next step, which would significantly enhance the impact of India’s carbon market.
