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Overview of the Carbon Credits Regime in India

By - King Stubb & Kasiva on October 13, 2023


The Carbon Credits Trading Scheme (CCTS), a significant stride towards bolstering sustainable development and ensuring a greener, cleaner future for the nation and the world, was implemented through the Energy Conservation (Amendment) Bill, 2022. This legislation empowers the central government to establish a framework for carbon trading.

The CCTS has also contributed to the development of the Indian Carbon Market (ICM), where a national framework for decarbonizing the country’s entire economy will be proposed, along with provisions for pricing Green House Gases emissions through Carbon Credits Certificates.

Furthermore, the scheme outlines a significant role for industries in contributing to India’s emission reduction goals. The Ministry of Power is empowered to identify designated consumers, which will include numerous energy-intensive industries, for the purpose of assigning them carbon emission targets. These entities that exceed the set targets will be issued carbon credit certificates, and those that fail to meet the targets will compensate for the shortfall by purchasing carbon credit certificates from the ICM.

Indian Carbon Credits Regime

In 2023, the Government of India launched the Carbon Credits Trading Scheme, also known as India’s Carbon Credit regime, to significantly reduce greenhouse gas emissions and promote environmental sustainability for future generations. This scheme assigns a value, known as a carbon credit, to every ton of carbon dioxide equivalent (CO2e) that is reduced or avoided.

Under this regime, industries that significantly contribute to carbon emissions play a major role in achieving India’s carbon emission goals. The Ministry of Power is responsible for identifying designated consumers, including numerous energy-intensive industries, and assigning them carbon emission targets.

A National Steering Committee has been established to ensure seamless market functioning. This committee has the authority to suggest procedures, rules, guidelines, and emission targets. The Bureau of Energy Efficiency handles administrative tasks related to the scheme and identifies sectors for emission reduction. It also issues carbon credit certificates based on recommendations from authorized agencies.

Transparent trading is facilitated through a secure registry operated by the Grid Controller of India Ltd. The Central Electricity Regulation Commission regulates trading activities, protects stakeholder interests, and oversees market operations. The Bureau has the authority to recommend greenhouse gas emission targets for entities obligated to fulfil these targets. The Ministry of Power is responsible for notifying these targets.

Entities that meet or exceed their targets are eligible to receive carbon credit certificates. Entities that fail to meet their goals must purchase carbon credit certificates to cover their deficits or pay a stipulated penalty. The scheme compels businesses to consider the environmental impact of their activities as a vital parameter in strategic decision-making. This involves companies investing in areas that facilitate the transition from current practices to environmentally friendly practices.

To maintain the rate of global warming at an ideal 2 Degrees Celsius, there is a need to decrease greenhouse gas emissions by at least 40-50% in the current decade. Therefore, the Indian Government has adopted this policy in light of these requirements.


The Carbon Credit Regime in India is indeed a progressive and environmentally friendly policy undertaken by the Government of India to promote sustainable development. It does enable the government, through its various ministries, to impose liability and threshold on various organizations and international players that significantly contribute to pollution.

However, the statement about the Energy Model Systems (EMS) having crucial roles in considering the behaviour of environmental systems and assisting in policy-making decisions for all stakeholders is not entirely accurate. While energy models like OSeMOSYS do play a significant role in long-run integrated assessment and energy planning, they are not specifically mentioned in the context of India’s Carbon Credit Regime.

Overall, this policy will indeed have a profound impact on the country’s carbon emissions and lead industries and organizations to take positive steps to reduce their greenhouse gas emissions.


What is the carbon credit policy in India?

Referred to in the bill as a carbon credit trading scheme, the bill effectively authorizes the central government to set up a national carbon credit trading system. A carbon credit in this context is effectively a permit to emit a pre-specified quantity of CO2 or other GHG emissions

What is the size of the carbon credit market in India?

India is one of the largest issuers of carbon credits in the world. Between 2010 to 2022 India issued 278 million credits in the Voluntary Carbon Market, accounting for 17% of global supply, according to a Jan.

When was carbon credit introduced in India?

In a backdrop to achieve its COP-26 commitments, the (Indian) Energy Conservation Act, 2001 was amended through the Energy Conservation (Amendment) Act, 2022 ("Act"), which has come into force on and from January 1, 2023.

King Stubb & Kasiva,
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