MoEFCC Notifies First Legally Binding Emission Rules: The Greenhouse Gas Emission Intensity Target Rules, 2025

Introduction

The Government of India has released the Greenhouse Gas Emission Intensity Target Rules[1], 2025, which require a number of industries to reduce the amount of greenhouses gases emitted per unit of production. It is the first time that India has made such targets legally binding. The rules apply to 282 industrial units in four sectors – aluminium, cement, pulp and paper, and chlor-alkali. Each of these four sectors represent a significant portion of energy use and industrial emissions.

The targets will be set in relation to a base year, 2023-24, and industries will be expected to show quantifiable reductions in their emission intensity during the compliance years of 2025-26 and 2026-27. Specifically, this means that for every tonne of product produced, the emissions of greenhouse gases must be lower than previous years. The new framework fits within a broader plan by India to create a national carbon credit trading system in which firms that perform well are going to receive tradable carbon credits, while those that do not perform will be required to offset some payment or purchase tradable credits.

The government is relying on its powers under the Energy Conservation (Amendment) Act, 2022, and the Environment (Protection) Act, 1986, to put these rules in place. It follows India’s stated climate goals, which include reducing the emission intensity of its growth domestic product (GDP) by 45 percent relative to 2005 levels by 2030 and achieving net-zero emissions by 2070. The notification also legally establishes a shift from voluntary to compliance-based action, establishing real accountability at the industry level.

Explanation

The Greenhouse Gas Emission Intensity Target Rules apply to 282 industrial units. The sector-wise distribution includes 186 units in cement, 13 in aluminium, 30 in chlor-alkali, and 53 in pulp and paper. Each of these sectors has been chosen based on the volume of their emissions and their role in the manufacturing economy. The focus is not on limiting total output but on encouraging more efficient production processes that release less greenhouse gas per unit of product.

The targets are defined as percentage reductions in emission intensity over the baseline year. The reduction levels differ slightly from sector to sector to account for technological and operational conditions. For instance, the cement sector has smaller percentage cuts than aluminium or chlor-alkali because its energy structure and production processes leave limited scope for short-term improvement. The targets are to be met over a two-year compliance period, after which the system will be reviewed and may expand to more sectors.

The new framework is supported by a structured monitoring and verification process. Each obligated entity must track its emissions data through a standardised reporting format. The Bureau of Energy Efficiency (BEE) will review the data and verify the reductions achieved. The Central Pollution Control Board (CPCB) is responsible for enforcement and collection of penalties in case of default.

Industries that have emissions that are lower than the limits assigned to them are granted Carbon Credit Certificates (CCCs). These can then be sold in the domestic carbon market to other industries that have emissions in excess of their limits. In this way, a market is created, rewarding industries who have managed better performance with a financial gain, while those who have less desirable performance can still fulfill their obligation through the trade mechanism. In cases where a company does not meet its target, nor buy enough credits to cover their excess emissions, that company must pay an environmental compensation penalty that is double the average carbon credit price in the year of offence.

This duality of regulation and trade is meant to sustain employee engagement in both compliance and innovation. The credits create financial incentives for early adopters that are engaged in action toward performance improvement, while the penalties discourage the opposite – inaction or negligence.

For large industries, these targets require both investment and operational planning. Many plants may need to shift to alternative fuels, upgrade to more efficient machinery, or modify production methods to cut energy use. For instance, in the cement sector, energy consumption and process emissions are linked to the chemical transformation of limestone, which is difficult to alter without technological change. In contrast, aluminium producers may adopt more efficient smelting processes or source cleaner electricity.

This approach is about meeting standards and being more competitive. As the global trading landscape is changing, countries and companies that have a lower carbon profile are gaining an advantage. The European Union’s carbon border adjustment mechanism, creates a cost on imported goods that are high carbon. India is helping its industries plan for this external pressure by making domestic commitments now.

This system also introduces an aspect of flexibility. There are no strict rules limiting total emissions by industry sector. The target of emission intensity instead allows industries to increase production levels, but reduce emissions per unit level at the same time. This makes a transition easier especially for sectors that are still growing in demand. Over time the government wants to bring more sectors into this system, creating a broader national carbon market.

Conclusion

India has implemented a set of emission intensity rules in which reporting industries are responsible for reporting reductions in measured emissions from business-as-usual emissions, are accountable for non-compliance with the standard, and are subject to enforceable sanctions for non-compliance. This new framework increases legal certainty, economic incentives for compliance, and the ability for flexible operations.

[1] https://beeindia.gov.in/sites/default/files/Greenhouse_Gases_Emission_Intensity_Target_Rules_2025.pdf