New Scheme Targets Emissions Cuts in Industrial Sectors to Meet Net-Zero Commitments
In a decisive step towards fulfilling its climate commitments, the Indian government has officially operationalised its Carbon Credit Trading Scheme (CCTS), aimed at reducing greenhouse gas (GHG) emissions across key industrial sectors. This milestone marks a strategic boost to India’s decarbonisation journey and further aligns the country with its Nationally Determined Contributions (NDCs) under the Paris Agreement.
Announced under the Energy Conservation (Amendment) Act of 2023, the CCTS sets specific emissions intensity reduction targets for eight energy-intensive sectors: steel, cement, aluminium, textiles, petrochemicals, oil refineries, paper & pulp, and chlor-alkali. These sectors, which contribute significantly to India’s industrial emissions, now have clearer accountability in the race towards a net-zero India by 2070.
How the Carbon Credit Scheme Works
The CCTS is modeled after India’s earlier Perform, Achieve, Trade (PAT) mechanism, a program that helped industrial units improve energy efficiency and reduce emissions over the last decade. Under the new system:
- Industries that surpass their emission reduction targets will be awarded carbon credit certificates, which are tradable on a carbon market.
- Entities falling short of targets can purchase credits from others to maintain compliance or risk facing penalties.
This market-based approach aims to incentivize low-carbon innovation while giving lagging companies a financial reason to catch up.
Sectoral Targets and Ambitions
While the program’s intent is commendable, early analysis shows that the annual emission intensity reduction target of 1.68% (2023–2027) may not be ambitious enough. Compared to the industry-wide decarbonization requirement of 2.53%, and the power sector’s 3.44%, the current CCTS figures appear modest.
Experts argue that to remain consistent with India’s 2030 pledge—a 45% reduction in emissions intensity from 2005 levels—these targets must be progressively tightened.
Nonetheless, the launch of CCTS is a crucial building block in creating a structured and measurable emissions reduction pathway, especially in heavy industries known for their complex decarbonization challenges.
What’s In and What’s Missing?
While the scheme rightly begins with eight high-emission sectors, it does not yet include:
- Power
- Transport
- Agriculture
- Thermal plants
- MSMEs (Micro, Small & Medium Enterprises)
These sectors collectively represent a large share of India’s total GHG footprint, and their absence could limit the effectiveness of CCTS in delivering an economy-wide impact.
Climate analysts emphasize that future expansions should include these sectors, along with deeper integration of monitoring, reporting, and verification (MRV) mechanisms that match global standards.
Challenges and Opportunities
India’s carbon credit scheme comes at a pivotal time when global attention is focused on credible pathways to net-zero. According to climate policy observers, for CCTS to evolve into a world-class emissions trading system, India must:
- Tighten future targets to reflect true ambition
- Expand sectoral coverage beyond heavy industry
- Link the scheme to India’s NDC and net-zero modeling
- Integrate with international markets, boosting credibility and liquidity
- Enhance MRV frameworks for transparency and accountability
Additionally, a shift from siloed, sector-wise compliance to a broader economy-wide assessment of climate performance would give India a more holistic and accurate view of its environmental progress.
Government’s Vision and Global Relevance
The Government of India’s commitment to sustainability and clean growth is well-aligned with its recent leadership in global climate forums such as G20 and COP28. The launch of CCTS underscores India’s ambition to lead from the front in the Global South’s green transition.
By incentivizing cleaner operations and pushing industries toward innovation, CCTS not only supports climate goals but also strengthens India’s competitiveness in the global low-carbon economy.
As countries move towards carbon border taxes and ESG-based trade norms, India’s early adoption of such a structured carbon credit mechanism could provide a critical edge to its exports and sustainable manufacturing sector.
A Constructive Start
While the Carbon Credit Trading Scheme may not yet be the silver bullet for India’s climate challenges, it sets the foundation for a more accountable and financially motivated decarbonisation strategy. With tweaks to ambition, coverage, and alignment, CCTS can become a flagship policy in India’s climate arsenal.
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