Analysis Of The Carbon Credit Trading Scheme, 2023 Notification

Posted On - 26 August, 2023 • By - King Stubb & Kasiva

Pursuant to the amendment through the Energy Conservation (Amendment) Act, 2022[1], the “Carbon Credit Trading Scheme, 2023,”[2] (“CCTS”) was issued by the Ministry of Power, India, in consultation with the Bureau of Energy Efficiency (“Bureau”). CCTS is a strategic initiative aimed at facilitating the trading of carbon credits to effectively mitigate greenhouse gas emissions and promote energy conservation and a sustainable future. With the perspective of a cap-and-trade mechanism, CCTS envisions a domestic carbon market that will back the industries and entities to limit their carbon emissions. This comprehensive notification outlines key definitions, committees, functions, and operational procedures that constitute this scheme. A brief analysis of its significant components follows:

Scheme Objectives: The primary objective of the Carbon Credit Trading Scheme is to establish a robust platform for the trading of carbon credits. These credits represent quantified units of emissions reduction, removal, or avoidance, with each credit equivalent to one metric ton of carbon dioxide equivalent (tCO2e). Such credits may be traded within the country’s industries and entities to control the emissions of greenhouse gases. The scheme intends to encourage obligated entities to minimize their carbon footprint by reducing emissions.

Definitional Clarity: The notification provides precise definitions for pivotal terms used throughout the scheme. Notable terms include “carbon credit“, “accredited carbon verification agency“, “compliance mechanism“, “meta-registry”, “non – obligated entities”, “obligated entities”, “registered entity”, “Registry” and “greenhouse gases.” The inclusion of these definitions ensures a consistent understanding among the stakeholders.

Indian Carbon Market Framework: This framework is a national framework established under CCTS which aims to reduce, prevent, control, remove or avoid the greenhouse gases’ emissions by Indian industries and entities. This is done by incentivizing such reductions in emissions by way of carbon credits, which can be traded among Indian industries and entities. The Government envisions that CCTS will encourage Indian industries and entities to participate under this framework and subsequently such participation will help reduce the carbon footprint on the environment.

National Steering Committee: The establishment of the National Steering Committee is a cornerstone of the scheme’s governance structure. Comprising representatives from various government ministries, domain experts, and stakeholders, the committee holds responsibility for overseeing the functionality of the Indian carbon market. It recommends, amongst others, greenhouse gas emission targets, guides trading guidelines, and ensures market monitoring, including any other functions assigned by the Central Government.

Bureau’s Role: The Bureau assumes the role of the carbon market’s administrator. The Bureau’s multifaceted functions include, amongst others, identifying sectors for emissions reduction, issuing carbon credit certificates basis the recommendation of National Steering Committee, formulating mechanisms for market stability for carbon credits, accrediting agencies to verify emissions reductions, and maintaining the necessary data and IT infrastructure, including any other functions assigned by the Central Government.

Role of the Registry: The Grid Controller of India Limited is designated as the registry for the Indian carbon market. This registry is, amongst others, tasked with maintaining accurate records of all transactions, sharing transactional data with relevant entities like the Power Exchange and Bureau, and establishing linkages with other national or international registries as approved by the Central Government, including any other functions as may be assigned by the Bureau. The registry plays a pivotal role in ensuring transparent and efficient market operations.

Regulatory Oversight: The Central Electricity Regulatory Commission assumes the regulatory role within the carbon market, ensuring fair trading practices in relation to the trading of carbon credit certificates, safeguarding the interests of participants, and preventing fraudulent activities. This regulatory framework is crucial for maintaining market integrity and transparency.

Compliance Mechanism: CCTS introduces a compliance mechanism aimed at obligated entities, requiring them to adhere to the limited greenhouse gas emission targets. Entities surpassing these targets and reducing the carbon footprint, are issued carbon credit certificates. In contrast, those falling short are obligated to purchase carbon credit certificates from the market, thereby incentivizing emissions reduction.

Detailed Operational Procedures: A paramount emphasis within the scheme is the development of comprehensive operational procedures for the Indian carbon market. These encompass various facets, including criteria for issuance and validation of carbon credit certificates, pricing and submission mechanisms, monitoring and reporting procedures, and verification protocols, including any other incidental or ancillary matters. These detailed procedures ensure a systematic and consistent framework for market operation.

Regulatory Authority of the Bureau: The notification vests unto the Bureau the authority to issue directions and orders to the registered entities subject to the approval of the Central Government. This authority is vital for the effective implementation of the scheme’s regulations and guidelines.


The CCTS, symbolizes India’s proactive approach to address climate change by harnessing market dynamics. The scheme establishes a well-defined framework, engaging various entities and committees, while prioritizing emissions reduction and energy conservation. This initiative underscores India’s commitment to fostering sustainable practices through innovative market-oriented strategies.

[1] The Energy Conservation (Amendment) Act, 2022

[2] S.O. 2825(E)