For years, India's carbon market existed in a largely voluntary form — companies could purchase carbon offsets and make sustainability claims, but there was no legally binding domestic compliance market. That changed in June 2025, when the Ministry of Power operationalised the Carbon Credit Trading Scheme (CCTS) under the Energy Conservation (Amendment) Act, 2022.
India's carbon market is no longer a future consideration. For energy-intensive industries and listed companies with significant emissions, understanding CCTS — how it works, what it costs, and what the strategic opportunities are — has become a material business issue.
What Is the Carbon Credit Trading Scheme (CCTS)?
The CCTS is India's domestic, legally binding carbon market. Under the scheme, designated energy-intensive industrial units are assigned emissions targets (called "carbon credit obligations"). Companies that reduce emissions below their target earn carbon credits, which they can sell on a regulated market. Companies that exceed their target must purchase carbon credits to cover the shortfall.
The governance structure involves three main bodies:
- Bureau of Energy Efficiency (BEE): Scheme administrator. BEE sets sector-specific emission intensity targets, registers participants, and manages the overall scheme.
- Grid Controller of India (GRID-INDIA): Manages the carbon credit registry — the official ledger of carbon credits issued, transferred, and retired.
- Central Electricity Regulatory Commission (CERC): Regulates the trading market, ensures market integrity, and sets trading rules.
Which Sectors and Companies Are Covered?
CCTS initially covers energy-intensive industries that are already subject to BEE's Perform Achieve and Trade (PAT) scheme, which has been running since 2012. The sectors expected to be brought under CCTS compliance include:
Important: Even if your organisation is not directly covered by CCTS compliance obligations, your energy-intensive suppliers may be. Their CCTS compliance costs will likely be passed through in procurement prices. Carbon accounting in your Scope 3 emissions will need to reflect this.
How Carbon Credits Are Issued and Traded
Under CCTS, BEE sets an emission intensity target for each designated unit — expressed as CO₂ equivalent per unit of production output. If a unit achieves an emission intensity below the target, it earns one carbon credit per tCO₂e of over-performance. These credits are registered on GRID-INDIA's registry and can be sold on the CERC-regulated exchange.
If a unit's emission intensity exceeds its target, it must purchase sufficient carbon credits to cover the gap by the compliance deadline. Failure to meet this obligation carries financial penalties.
The PAT-CCTS Transition
The transition from PAT (Perform Achieve and Trade) to CCTS is important to understand. PAT has been running since 2012 and has driven significant energy efficiency improvement across Indian industry. CCTS builds on PAT's infrastructure but makes carbon trading legally binding and more directly linked to the emissions trading markets aligned with the Paris Agreement.
Carbon Credits vs Green Credits — An Important Distinction
SEBI's March 2025 circular introduced green credits into the BRSR disclosure framework — distinct from carbon credits. Green credits are awarded for ecosystem restoration activities (reforestation, wetland restoration) rather than emission reductions. Both can be disclosed under BRSR Leadership Indicators, but they serve different purposes:
- Carbon credits: Compensate for emissions reductions or avoidance. Relevant to CCTS compliance and net zero commitments.
- Green credits: Reward environmental restoration. Relevant to BRSR Leadership Indicators and biodiversity disclosures.
A company planting trees on degraded forest land could potentially earn both — carbon credits for CO₂ sequestration and green credits for biodiversity restoration. Understanding which market values each type of credit is strategically important for organisations investing in nature-based solutions.
Strategic Implications for Indian Listed Companies
For CCTS-Covered Organisations
The primary obligation is meeting your emission intensity targets. But organisations that over-perform relative to targets earn carbon credits that can be monetised. Early investment in energy efficiency and renewable energy adoption — which many companies have already made for cost reasons — now has an additional financial return in the form of carbon credit revenue.
For BRSR-Reporting Organisations
SEBI now requires disclosure of carbon credits purchased, retired, and held in inventory under BRSR Leadership Indicators. This means your CCTS participation — or your voluntary carbon credit purchases — must be tracked, documented with registry serial numbers, and reported. CarbonFlow handles this tracking automatically.
For Exporters to the EU
The EU's Carbon Border Adjustment Mechanism (CBAM) imposes carbon tariffs on imports of steel, cement, aluminium, fertilisers, and electricity from countries without equivalent carbon pricing. From 2026, Indian exporters in these sectors will need to document and disclose the carbon price paid on their emissions in India. CCTS participation — and the resulting documentation — is directly relevant to CBAM compliance.
CarbonFlow's CCTS module tracks your carbon credit positions, integrates with GRID-INDIA registry data, maps credits to BRSR Leadership Indicator disclosures, and provides documentation for CBAM reporting purposes — all in one platform.
What To Do Now
- Assess whether you are a designated unit under CCTS. Check with BEE or your sustainability consultant whether your facilities meet the energy consumption thresholds for designation.
- Establish a baseline emissions inventory. CCTS targets are set relative to baseline emission intensity. You need accurate Scope 1 and 2 data — and a documented methodology — before targets can be meaningfully assessed.
- Identify low-cost abatement opportunities. Energy efficiency measures, fuel switching, and renewable energy procurement all reduce emission intensity. Model these interventions against your target before the compliance period opens.
- Set up BRSR carbon credit tracking. Even if you're not directly under CCTS, your voluntary carbon credit purchases must be documented and disclosed under BRSR Leadership Indicators from FY 2025–26.
Prepare your organisation for CCTS and BRSR carbon credit disclosure
CarbonFlow's team of sustainability and regulatory experts will help you assess your CCTS exposure, build your emissions baseline, and set up BRSR-compliant carbon credit tracking.
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