An Overview of Carbon Credit Trading Scheme (CCTS)
Carbon Credit Trading Scheme (CCTS) was introduced on June 28, 2023, as notified by the Ministry of Power (MoP) under the Energy Conservation (Amendment) Act, 2022. The Carbon Credit Trading Scheme 2023 expands India’s market-based climate mechanisms beyond the PAT scheme into a comprehensive GHG emissions trading system. It covers several hundred regulated entities. As per the framework for the Indian carbon market under the CCTS 2025, Sectors moving from PAT-based mechanisms into the compliance framework under CCTS include cement, pulp and paper, aluminium, petroleum refineries, petrochemicals, textiles, and chlor-alkali. Thermal power plants are currently excluded from the CCTS compliance mechanism.
CCTS focuses on direct reduction of Greenhouse Gas (GHG) emission intensity. Under this scheme, Carbon Credit Certificate (CCC) is issued for verified emission reductions. The Carbon Credit Trading Scheme target industries including Iron and Steel, Aluminum, Cement, Textiles, Pulp and Paper, Fertilizers, Petroleum and refineries.
The Carbon Trading Scheme starts operating in 2025 under its first compliance years: FY2025-26 and FY 2026-27, with FY2023-24 as a baseline for record of past emissions. The CCTS promotes GHG reductions, supports net zero emissions by 2070, reduces 45% emission intensity by 2030, and incentivise decarbonisation by trading of Carbon Credit certificate.
What is the Carbon Credit Trading Scheme?
India has launched a strategic and market-based approach, the Carbon Credit Trading Scheme (CCTS). To understand this, you must know about “Carbon Credit”, which is a tradable certificate or permit that represents the reduction or removal of one metric ton of carbon dioxide equivalent (tCO2e) from the atmosphere. Companies achieving lower emissions earn carbon credits, giving them financial value. Otherwise, if any company emits CO2 below a certain level or performs sequestration of CO2 from the atmosphere, it will receive a carbon credit. Therefore, 1 ton of CO2 or CO2 equivalent, either reduced or removed, will equal 1 Carbon Credit.
The government determines carbon allowances or caps according to its emission reduction targets. Under the Carbon Credit Schemes, Indian Carbon trading will be done based on the Cap-and-trade mechanism.
A Carbon Market creates a government-backed carbon trading platform where public and private firms buy and sell credits, reduce emissions, increase energy efficiency, and actively participate in regional and global carbon markets. A Carbon Trading Company connects credit generators with buyers, identifies eligible projects, and promotes compliant trading under the carbon credit regulations.
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Consult with an expertGoverning Authorities in the Carbon Credit Trading Scheme
There are four key authorities responsible for regulating and managing the Carbon Credit Trading Scheme in India, as outlined below:
Bureau of Energy Efficiency (BEE)
The Bureau of Energy Efficiency administers the Carbon Credit Trading Scheme and issues Carbon Credit Certificates based on verified emission reductions achieved by participating entities.
Central Electricity Regulatory Commission (CERC)
The Central Electricity Regulatory Commission regulates carbon credit trading activities and ensures market integrity through effective oversight, monitoring, and corrective actions.
National Steering Committee
The National Steering Committee sets the policy direction and oversees the overall functioning of the Indian Carbon Market, including the approval of regulatory frameworks and strategic recommendations.
Grid Controller of India (GCI)
The Grid Controller of India manages the central registry and digital infrastructure of the Indian Carbon Market, including participant registration, carbon credit issuance, and transaction tracking.
How to Generate Carbon Credits in India?
Some of the best ways to generate carbon credits in India are given below.
- Energy-efficient measures
- Renewable energy projects
- Plan Vivo standard
- Waste-to-energy projects
- Mulching
- Direct-seeded rice
- Crop rotation
- Cover crops
- No-till or conservation tillage
What are the Benefits of the Carbon Credit Trading Scheme?
The Carbon Credit Trading Scheme lowers the harmful GHG emissions by setting a monetary value for carbon reductions with environmental, economic, and social benefits.
Greenhouse Gas (GHG) Emission Reduction
The Carbon Credit Trading Scheme creates financial incentives for businesses to reduce greenhouse gas emissions. Companies that successfully cut emissions can earn and trade carbon credits.
Encourages Sustainable Practices
The carbon trading scheme promotes investments in renewable energy, energy-efficient industrial technologies, and cleaner fuels, enabling a transition toward low-carbon operations.
Improves Air Quality
Reduced dependence on fossil fuels helps lower air pollution levels, resulting in cleaner air and improved public health outcomes.
Creates New Earning Opportunities
Businesses, project developers, landowners, and farmers can generate additional income by selling surplus carbon credits in regulated markets.
Promotes Innovation and Efficiency
Emission reduction targets encourage organizations to innovate and adopt advanced technologies, improving operational efficiency and long-term sustainability.
Attracts Climate-Friendly Investments
Participation in a regulated carbon market strengthens ESG credentials, helping companies attract investors and strategic partners focused on sustainable financing.
Supports Job Creation and Economic Growth
Carbon credit schemes generate employment opportunities in renewable energy, carbon auditing, sustainability consulting, and emissions monitoring sectors.
Supports National Climate Commitments
The Carbon Credit Trading Scheme helps India align with the Paris Agreement and its Nationally Determined Contributions (NDCs) while advancing toward net-zero goals.
Enables Global Market Alignment
The carbon trading scheme prepares Indian businesses for global mechanisms such as the Carbon Border Adjustment Mechanism by aligning with international carbon frameworks.
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Book a 30-Min Expert CallWhat are the Categories of Businesses that require Carbon Credit Schemes?
The Carbon Credit schemes in India applies to nine major industrial sectors that are among the country’s largest emitters of GHG. India targets 45% emission reduction by 2030 and Net zero emissions by 2070 with strict regulations in the categories given below:
Iron & Steel
Cooking ovens and blast furnaces consume large quantities of coal and emit significant CO₂. Emission reduction measures include improving furnace efficiency, adopting alternative fuels, and implementing waste heat recovery systems.
Cement
Clinker production generates high CO₂ emissions, and kiln operations are highly energy-intensive. Efficiency upgrades, use of alternative fuels, and blending materials such as fly ash help reduce the carbon footprint.
Aluminium
Smelting and electrolysis require substantial electricity, largely coal-based, resulting in high emissions. Perfluorocarbon emissions further impact the climate. Key measures include renewable energy adoption, efficient furnaces, and scrap recycling.
Petrochemicals
Naphtha and gas cracking units emit CO₂ and methane. Improving energy efficiency and shifting to cleaner energy sources are essential to reducing greenhouse gas emissions.
Petroleum Refining
Refineries burn fossil fuels for heat and power, producing significant CO₂ emissions. Carbon capture solutions, renewable energy integration, and process efficiency improvements in distillation and cracking help meet emission targets.
Fertilizers
Ammonia production relies heavily on hydrogen derived from natural gas, resulting in high CO₂ emissions. Enhancing process efficiency and adopting green hydrogen are key measures to reduce environmental impact.
Textiles
Dyeing, washing, and finishing processes often depend on coal or gas. Electrification, renewable energy adoption, and machinery efficiency improvements help reduce carbon emissions.
Pulp & Paper
Production processes consume biomass and fossil fuels, releasing CO₂. Waste heat recovery, efficient boilers, and increased paper recycling support emission reduction and sustainable production.
Chlor-Alkali
Electrolysis involves high electricity consumption, often coal-based. Emission reduction is achieved through energy efficiency improvements, renewable electricity integration, and advanced membrane technologies.
What is the Checklist for Obtaining the Carbon Credit Trading Scheme?
Every business must ensure the following checklist for obtaining the Carbon Credit Trading Scheme.
- Project development (registration, Project Design Document (PDD), and MRV plan)
- Validation and verification (ACVA review and data confirmation)
- Registration and issuance (carbon credit issuance and official project approval)
- Trading and compliance (reporting, meeting targets, and trading on exchanges)
Eligibility Criteria for Carbon Credit Trading Scheme
The eligibility for the Carbon Credit Trading Scheme includes Obligated and Non-obligated entities. See below to know the industries, requirements, and eligibility for both.
Obligated Entities (Compliance Mechanism)
Industry Energy-intensive industries such as aluminium, cement, and textiles.
Requirement: Adhere to Greenhouse gas (GHG) emission targets set by the government.
Eligibility: Earn carbon credit certificate (CCCs) to reduce emissions below their target.
Non-Obligated Entities (Off-Set Mechanism)
Industry: Companies, startups, NGOs, or individuals in reforestation, renewable energy, waste management, and energy conservation.
Requirement: Must involve projects – voluntary, new and beyond usual business without government funding.
Eligibility: Register projects, get approved by independent auditors, and generate tradeable CCCs.
What are the Documents Required for the Carbon Credit Trading Scheme?
Documents required for the Carbon Credit Trading Scheme vary as per project developers, obligated entities, and trading businesses. See below:
Documents for Project Developers (GENERATING CREDITS)
Project Design Documents (PDD)
(Scope of project, emission reduction approach, monitoring framework, baseline parameters)
Monitoring reports
(Operational data gathered during implementation – fuel records, emission data, and energy consumption)
Validation report:
verified statement from Accredited Carbon Verification Agency (ACVA). It confirms the validity of PDD.
Verification report
Obtained from ACVA confirming actual emission reductions.
Carbon Credit Certification (CCCs):
Issued by the governing body (like BEE).
Documents for Obligated Entities (COMPLIANCE)
- Registration details, including the entity name, contact information, and reporting year
- GHG emission report covering all emission sources (CO₂ and other GHGs in tCO₂e)
- Monitoring plan for tracking and reporting emissions
- Methodology documentation used to assess emission reductions
- Supporting data, including fuel consumption records, sampling plans, audit records, and laboratory reports
- Performance assessment document outlining annual emission reduction targets
- Verification certificate issued by an ACVA confirming the accuracy of the submitted reports
Documents for General Business Setup Documents for Trading Companies
- Valid identity and address proof of the founders
- Memorandum of Association (MoA), Articles of Association (AoA), and other company incorporation documents
- Business plan along with financial projections
India’s carbon trading era
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Book a 30-Min Advisory CallChallenges Ahead in Carbon Credit Trading Scheme
Businesses might face several challenges ahead in the Carbon Credit Trading Scheme, which are essential to know for carbon trading in India.
- MRV challenges arise from strict monitoring and verification requirements, making accurate emission tracking and transparency difficult.
- Risks in target setting may disrupt carbon pricing and weaken overall market effectiveness.
- Weak compliance enforcement, due to lenient penalties, can undermine the credibility of the Carbon Credit Trading Scheme (CCTS).
- The risk of double counting may lead to duplicate or inaccurate emission reporting across the carbon market.
- Delays in credit issuance can reduce market confidence and discourage stakeholder participation.
- Limited industry participation, particularly among small and medium enterprises, due to low awareness and understanding of the scheme.
How India Can Strengthen the Carbon Credit Trading Scheme?
India can strengthen the Carbon Credit Trading Scheme in the following ways. Look below:
- India should adopt proven global practices from established carbon markets such as the European Union Emissions Trading System (EU ETS), including price stability mechanisms, tighter emission caps, and strict enforcement to ensure credible carbon pricing.
- Strengthen Monitoring, Reporting, and Verification (MRV) systems to enhance transparency, accuracy, and market credibility.
- Develop a compliant and secure trading platform with digital registration to enable efficient credit tracking and prevent fraud.
- Ensure cross-border compatibility to align with international carbon markets and minimize trade-related restrictions.
- Encourage industry participation by offering tax incentives and policy support to early adopters that reduce emissions in compliance with CCTS regulations.
- Promote capital investment in green technologies, renewable energy solutions, and energy efficiency improvements.
How can Enterclimate Assist for the Carbon Credit Trading Scheme (CCTS)?
Enterclimate is a trusted climate and environmental compliance consultancy, providing expert, end-to-end assistance under India’s Carbon Credit Trading Scheme (CCTS). Our specialists support businesses through every stage of CCTS compliance, from emissions baseline assessment to carbon credit issuance and trading, ensuring strict adherence to government regulations.
From EPR Compliance management to environmental audit and ESG report, we look into every aspect of sustainability consulting. Here’s how Enterclimate supports for Carbon trading in India:
- Enterclimate supports carbon credit registration, verification agency accreditation, and compliant trading in accordance with applicable laws.
- Our experts bring over 10 years of experience in carbon licensing, carbon markets, and regulatory compliance solutions.
- Dedicated client support ensures fast, accurate, and timely resolution of all regulatory and compliance-related queries.
- Future-ready climate solutions aligned with India’s Net Zero 2070 commitment and emission reduction targets for 2030.
- A regulation-focused approach fully aligned with governing authorities such as the Ministry of Power (MoP), BEE, CERC, and GCI to minimize risks, errors, and penalties.
- End-to-end support in generating carbon credits and selling them to the right buyers under the Indian Carbon Market.
- Practical decarbonization guidance for high-emission sectors including steel, cement, fertilizers, power, textiles, and other industries.
- Expert assistance in preparing Project Design Documents (PDDs), monitoring plans, and verification reports.
- Transparent processes to ensure accurate carbon credit tracking and prevent double counting.
- ESG-aligned carbon solutions that help businesses enhance sustainability performance and attract investors.
FAQs on Carbon Trading Scheme
The Carbon Credit Trading Scheme is India’s government-backed carbon market that allows businesses to earn, buy, or sell carbon credits based on verified greenhouse gas (GHG) emission reductions. It introduces a regulated cap-and-trade mechanism supporting compliance, decarbonization, and monetization of emission reduction efforts under the Indian Carbon Market framework, nationwide implementation.
Energy-intensive industries such as steel, cement, aluminium, fertilizers, petroleum refining, petrochemicals, textiles, pulp and paper, and chlor-alkali units are obligated under the carbon credit schemes. These entities must meet government-set emission intensity targets or purchase carbon credits to offset excess emissions during each compliance cycle as defined by the annually issued sectoral regulations.
Carbon trading scheme under CCTS begins from FY 2025–26. FY 2023–24 is treated as the baseline year for historical emissions, while FY 2026–27 forms the second compliance period for obligated entities under the initial phase of the Indian Carbon Market framework, as notified by the Ministry of Power regulations issued nationally applicable.
Businesses can generate carbon credits by implementing approved emission-reduction projects, preparing Project Design Documents, following MRV plans, and undergoing validation and verification by accredited agencies. Upon successful verification, Carbon Credit Certificates are issued by the designated authority for trading or compliance use within the Indian Carbon Market regulatory framework formally.
One carbon credit represents the verified reduction or removal of one metric ton of carbon dioxide equivalent from the atmosphere. It is the standard unit used for compliance, trading, and valuation within India’s regulated carbon credit market, ensuring transparency, consistency, comparability, and integrity across all approved emission reduction projects nationwide.
Bureau of Energy Efficiency (BEE) administers the scheme and issues carbon credits, Central Electricity Regulatory Commission (CERC) regulates trading and market integrity, Grid Controller of India (GCI) manages the central registry, and the National Steering Committee (NSC) provides policy oversight. Together, these authorities ensure transparent operations, regulatory compliance, and credibility of the Indian Carbon Market across regulated participants, sectors, platforms, transactions, and processes nationwide.
Yes, non-obligated entities such as startups, NGOs, farmers, and project developers can participate in carbon trading in India. They must implement voluntary, additional projects beyond business-as-usual, obtain third-party verification, and register credits for trading within the Indian Carbon Market framework, subject to eligibility rules, approved methodologies, audit timelines, registry procedures, and issuance guidelines notified officially.
Carbon credits in India are traded on government-approved exchanges through a regulated electronic platform. The system ensures transparent price discovery, secure transactions, proper settlement, and real-time tracking of credits through the central registry managed by Grid Controller of India for compliance, auditability, market integrity, fraud prevention, reporting, reconciliation, and oversight purposes.
CCTS helps businesses achieve regulatory compliance, generate new revenue through surplus credits, reduce emissions, enhance ESG performance, attract climate-focused investment, and prepare for global carbon regulations such as CBAM while supporting India’s national climate commitments under the Paris Agreement, NDCs, net-zero roadmap, industrial decarbonization strategy, policy alignment, competitiveness, resilience, growth, transition.
Enterclimate provides end-to-end support for carbon credit registration, MRV documentation, ACVA coordination, credit issuance, and compliant trading. Our experts help businesses navigate regulations, reduce risk, meet targets, and monetize emission reductions efficiently under the Carbon Credit Trading Scheme with regulatory clarity, audit readiness, timelines, accuracy, governance, transparency, scalability, assurance, and confidence.
