New Rules Mark a Major Step Toward India’s Net-Zero Transition and Global Climate Leadership
In a decisive step toward building a low-carbon economy, India has notified the Greenhouse Gases Emission Intensity Target Rules, 2025, setting the country’s first legally binding emission reduction targets for carbon-intensive sectors such as aluminium, cement, pulp and paper, and chlor-alkali.
Issued by the Ministry of Environment, Forest and Climate Change on October 8, 2025, the new rules mandate 282 industrial facilities to lower their greenhouse gas (GHG) emissions per unit of output—known as emission intensity—from a 2023–24 baseline. The compliance period begins in 2025–26 and continues through 2026–27, making this the first formal cycle under India’s domestic carbon market framework.
Operationalising India’s Domestic Carbon Market
These new targets bring into force key provisions of the Energy Conservation (Amendment) Act, 2022, which empowered the government to establish a national carbon credit trading system.
Until now, India’s Perform, Achieve, and Trade (PAT) scheme focused on improving energy efficiency across industries but did not directly regulate carbon emissions. The new rules go a step further by quantifying and capping carbon output, creating the foundation for a robust, market-driven approach to climate management.
Facilities that emit below their assigned carbon intensity target can now earn tradable carbon credit certificates, while those that exceed the limit must either purchase equivalent credits from the Indian Carbon Market (ICM) or pay an environmental compensation—a penalty twice the average carbon credit trading price for that year.
The Bureau of Energy Efficiency (BEE) will determine the average trading price annually, while the Central Pollution Control Board (CPCB) will oversee penalty enforcement and recovery.
Sectoral Targets and Key Players
The first compliance cycle brings India’s largest industrial players under its fold. Aluminium smelters operated by Vedanta, Hindalco, Nalco, and Balco, and leading cement producers such as UltraTech, Dalmia, JK Cement, Shree Cement, and ACC, have been assigned measurable emission reduction goals.
The emission intensity reduction targets vary by sector:
- Cement: ~3.4% reduction over two years
- Aluminium: ~5.8% reduction
- Chlor-Alkali: ~7.5% reduction
- Pulp & Paper: ~7.1% reduction
These differentiated targets reflect both the current emission profiles and decarbonisation potential of each sector.
Driving India’s Climate Commitments
This landmark notification represents a pivotal policy move in India’s journey toward fulfilling its Nationally Determined Contributions (NDCs) under the Paris Agreement.
India has pledged to:
- Reduce emission intensity of GDP by 45% by 2030 from 2005 levels.
- Achieve net-zero emissions by 2070.
By directly linking industrial emissions to market-based incentives, the rules are expected to accelerate technology adoption, energy efficiency, and green innovation across heavy industries—traditionally seen as hard to abate.
A Step Toward Global Competitiveness
Beyond domestic climate goals, the move also strategically positions Indian industries to navigate upcoming global carbon compliance regimes, particularly the European Union’s Carbon Border Adjustment Mechanism (CBAM).
CBAM imposes levies on carbon-intensive imports such as cement, steel, and aluminium, requiring exporters to disclose and offset embedded emissions. By adopting measurable carbon intensity targets, India is helping its industrial exporters prepare for a new era of carbon-conscious trade.
As global markets increasingly reward cleaner production, these rules could become a competitive advantage for Indian companies transitioning early to low-carbon manufacturing.
Catalysing the Carbon Credit Economy
The implementation of emission intensity targets also gives momentum to India’s emerging carbon credit trading ecosystem, which is expected to become operational in the coming year.
Under this mechanism:
- Each verified emission reduction will translate into a tradable carbon credit certificate.
- These credits can be bought or sold within the domestic carbon market, allowing industries to meet compliance targets flexibly.
- Revenue from credit sales will encourage industries to invest further in renewable energy, waste heat recovery, and carbon capture technologies.
This market-based structure promotes cost-effective decarbonisation and opens up new investment opportunities for sustainability-focused businesses and financial institutions.
Empowering Industries Through Measurable Action
Industry experts view the Greenhouse Gases Emission Intensity Target Rules, 2025 as a milestone in environmental governance. By introducing measurable, verifiable, and tradable targets, the government has laid the groundwork for a transparent and accountable climate framework.
It not only enables industries to quantify their climate progress but also rewards those who invest in cleaner operations. In the long run, this approach will help India decarbonise its industrial backbone without compromising economic growth.
Environmental economists also note that linking emission reductions with financial instruments creates a virtuous cycle—driving innovation, green technology adoption, and new job creation in sectors like renewable energy, energy efficiency, and carbon management.
Balancing Growth and Green Goals
While the industrial transition will require sustained investments and technological shifts, India’s calibrated approach—phased targets, tradable credits, and fair penalties—balances climate ambition with economic pragmatism.
By allowing companies flexibility to trade or invest in mitigation, the rules prevent disruption while fostering long-term transformation. Moreover, the government’s focus on building capacity within industries ensures that even mid-sized players can participate meaningfully in the carbon market.
A New Era of Accountability
The notification also sends a strong message: sustainability is no longer voluntary—it is structural.
As emission intensity becomes a performance metric, companies will need to integrate carbon management into their business strategies and report progress transparently.
This marks a major evolution from voluntary corporate social responsibility to mandatory climate accountability, positioning India among the few major economies with legally enforceable carbon efficiency standards.
Paving the Path to a Low-Carbon Future
India’s Greenhouse Gases Emission Intensity Target Rules, 2025 mark a turning point in its climate journey—where policy meets market, and ambition meets action.
By setting the first carbon intensity targets, India is moving beyond energy efficiency to quantifiable emission reductions, setting a global example for developing economies balancing growth with green goals.
As industries align their production models with sustainability metrics, the message is clear: India’s industrial future is green, accountable, and globally competitive.
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