India's Carbon Credit Trading Scheme: sectors, targets, credits and the first compliance year

India's compliance carbon market has moved from paper to practice. The first emission intensity targets apply to FY 2025-26, verification of the first year's results is under way, and the first carbon credit certificates are expected in 2027. This guide explains who is covered, how targets and certificates work, what happens on a shortfall, and how the voluntary offset route fits in.

What is the Carbon Credit Trading Scheme?

The Ministry of Power notified the Carbon Credit Trading Scheme (CCTS) in June 2023 under the Energy Conservation Act, and added an offset mechanism for non-obligated entities in December 2023¹. The scheme has two parts:

• a compliance mechanism, under which notified entities in energy-intensive sectors must cut their greenhouse gas emission intensity to a target; and
• an offset mechanism, under which other entities can register projects that reduce or remove emissions and earn credits¹.

The Bureau of Energy Efficiency (BEE) administers the scheme; the Ministry of Environment, Forest and Climate Change (MoEFCC) notifies the targets.

Who is obligated?

The Greenhouse Gases Emission Intensity Target Rules, 2025 (G.S.R. 739(E) of 8 October 2025) set targets for 282 entities in four sectors — cement (186), pulp and paper (53), chlor-alkali (30) and aluminium (13) — against a 2023-24 baseline, for the compliance years 2025-26 and 2026-27²⁵. An amendment of 13 January 2026 (G.S.R. 25(E)) added 208 more: secondary aluminium (3), petroleum refineries (21), petrochemicals (11) and textiles (173)².

For the entities added in January 2026, the 2025-26 target applies pro rata to the remaining months, January to March 2026². Iron and steel is not yet covered: a revised draft of June 2026 proposed targets for 255 units from 2026-27, skipping 2025-26⁹.

How are the targets set?

Each entity has its own target, expressed as tonnes of CO₂e per tonne of equivalent product (refineries use a refinery-specific unit)². Targets tighten over the two years: about 40% of the required reduction falls in 2025-26 and the rest in 2026-27³. Because they are intensity targets, an entity that grows output can comply while its absolute emissions rise — and one that shrinks can miss its target while its emissions fall.

The compliance cycle

BEE's procedure sets out each compliance year⁴:

1. Monitoring plan — prepared at the start of the cycle, describing how emissions and production will be measured.
2. Monitoring and reporting — emissions and production through the year, with records kept for verification.
3. Verification — the entity's report is verified by an accredited carbon verification agency and submitted to BEE within four months of the end of the compliance year⁴. BEE has accredited verification agencies for this; for FY 2025-26, verification was still running in October 2026⁷.
4. Issuance or surrender — an entity that beats its target is issued carbon credit certificates; one that misses it must surrender certificates — bought, or banked from earlier — to cover the gap⁴.

Certificates can be banked for later years⁴. As of 21 October 2026, verification of the first year was still under way and no certificates had been issued or traded, so there was no market price; trading on the exchanges was expected in early 2027⁷.

What happens on a shortfall?

An entity that does not surrender enough certificates pays environmental compensation, imposed by the Central Pollution Control Board: reported as twice the average trading price of certificates during that compliance year, payable within 90 days⁶. Since there is no price yet, the first year's exposure depends on how trading develops — another reason to know your position early.

The offset mechanism

Entities that are not obligated can earn credits from projects under BEE's offset procedure, effective from March 2025: projects in India that started on or after 1 January 2025, validated and verified by accredited agencies, with a crediting period of 10 years, or 5 years renewable up to 15¹⁰. BEE has approved methodologies for, among others, grid-connected renewable energy, green hydrogen, industrial energy efficiency and fuel switching, landfill methane, manure methane, and afforestation and reforestation, including mangroves⁸. We take a project through the steps in How to earn and sell carbon credits in India, and compare carbon credits with green credits in Carbon credits vs green credits.

How does the CCTS connect to other reporting?

• BRSR: the same Scope 1 and Scope 2 emissions underlie your BRSR GHG footprint. Keeping one approved figure for both avoids two versions of your emissions.
• EU CBAM: an EU importer can deduct a carbon price effectively paid in the country of production. Whether — and how — payments under the CCTS will count is not yet settled; see our guide to EU CBAM for Indian exporters.
• Product and site data: targets are per tonne of product, so production data need the same rigour as fuel and electricity data. Our guide to calculating emissions from activity data covers the emissions side.

What to do now

1. Know your number: track monthly intensity against the 2025-26 and 2026-27 targets, unit by unit, rather than waiting for year-end.
2. Prepare for verification: meter records, fuel invoices, stock checks, laboratory analyses and production records for every month, with a clear trail from source to total.
3. Plan your certificate position: an expected surplus can be banked or sold; an expected shortfall should be priced before trading opens.
4. Watch for new sectors: iron and steel, and possibly fertilisers, are being prepared.

How ESGTrack helps

ESGTrack tracks your emission intensity against the notified target, unit by unit — the emissions from the same approved fuel and electricity data as your GHG inventory and BRSR (or entered for the unit), and the production you record for each unit. It shows the certificates you would earn or need to surrender, and the compensation exposure, and keeps the report to BEE and a certificate ledger. See compliance programmes and carbon accounting.