How CCTS is accelerating India Inc.’s race to decarbonize

Indian emitters are overhauling green strategies as Carbon Credit Trading Scheme tightens compliance, driving the shift to low-carbon operations.

In brief

• India’s Carbon Credit Trading Scheme (CCTS) promotes sectoral emissions reduction, targeting energy-intensive industries for a sustainable future.
• Emission intensity targets for sectors like aluminum and cement, notified in 2025, require reductions of 2.8% to 15%, promoting a gradual path to lower emissions.
• Companies delaying action face significant financial risks as evolving carbon regulations and rising carbon prices threaten business-as-usual pathways through 2030-2040.
• Effective carbon pricing strategies under India’s CCTS encourage industries to lower emissions, aligning with global climate transition goals.

India’s Carbon Credit Trading Scheme (CCTS) marks a structural shift in how industries plan, invest and operate. Built on a dual system of compliance and voluntary markets, the mechanism aims to reduce greenhouse gas intensity across India’s most energy-intensive sectors. While early targets appear modest, the tightening of benchmarks over time—aligned with India’s net-zero roadmap—will require industries to adopt credible and accelerated pathways for industrial decarbonization.

Bold sectors such as aluminum, cement, chlor-alkali, and paper and pulp are now governed by emission intensity targets that were officially notified in 2025, covering hundreds of industrial entities with legally binding reductions for the 2025-26 and 2026-27 compliance periods. These targets range from approximately 2.8% to 15% reductions, depending on sector specifics, and are designed to facilitate a gradual yet firm glide path toward lower emissions baselines. The phased approach also reflects extensive stakeholder consultations to balance industrial competitiveness with environmental urgency.

Sector analyzes across cement, aluminum, chlor-alkali, paper and pulp, iron and steel, textiles, refineries and petrochemicals reveal a consistent pattern: business-as-usual pathways expose companies to significant financial risks. With evolving carbon regulations, maturing carbon compliance markets, and the rollout of CCTS, alongside growing interest in carbon credits in India, companies that delay action will face higher liabilities as carbon prices rise through 2030-2040.

Despite its strategic approach, the domestic CCTS market has not yet begun credit issuance under the compliance mechanism, indicating implementation lags as regulators refine procedures for monitoring, reporting, and verification (MRV) and trading infrastructure ahead of the expected 2026-27 launch. Industry observers see this as a temporary hurdle that underscores the importance of robust MRV systems and transparent emissions reporting to build market confidence and prevent distortions.

At the same time, the economics of decarbonization are improving rapidly. Renewable energy, waste-heat recovery, biomass, digital transformation, green hydrogen and low-carbon fuels are becoming increasingly viable energy transition levers, supported by declining abatement cost curves. Over time, the cost of abatement is expected to fall below projected carbon prices, strengthening the business case for internal reductions rather than market purchases through carbon trading mechanisms or future Emissions Trading Systems (ETS) in India.