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Carbon Pricing in India: Market Mechanisms for Climate Leadership https://www.pib.gov.in/PressNoteDetails.aspx?NoteId=154721&ModuleId=3 23 JUN 2025    India is moving towards a rate-based Emissions Trading System (ETS) with the adoption of the Carbon Credit Trading Scheme (CCTS) in July 2024.     The national ETS will initially cover nine energy-intensive industrial sectors.     Credit Certificates will be issued to facilities that outperform benchmark emissions intensity levels.

Energy & Environment
Carbon Pricing in India
Market Mechanisms for Climate Leadership
Posted On: 23 JUN 2025 12:34PM

Introduction

Carbon pricing is a policy tool that puts a financial cost on greenhouse gas emissions, primarily carbon dioxide, to incentivize reductions in pollution and promote a shift towards cleaner energy sources. It works by making emitters pay for the environmental damage caused by their pollution, encouraging them to reduce emissions.

 

India is rapidly advancing toward a structured and regulated carbon pricing ecosystem as part of its broader climate and sustainable development agenda. Against the backdrop of increasing global emphasis on carbon markets and emissions trading, India is now actively developing a rate-based Emissions Trading System (ETS) and associated voluntary carbon crediting mechanisms. The World Bank’s “State and Trends of Carbon Pricing 2025” report has recognized India’s growing role among emerging economies in shaping global climate finance and carbon pricing frameworks.

 

Rate-based ETS refers to a system where total emissions are not capped but individual entities are allocated a performance benchmark that serves as a limit on their net emissions. Rate-based ETSs offer additional flexibility in managing future growth uncertainty as well as international competitiveness concerns.

 

India’s Position in Global Carbon Pricing Landscape

 

    India is among the key middle income and emerging economies making significant strides in carbon pricing implementation alongside Brazil and Türkiye.
    India is moving towards a rate-based Emissions Trading System (ETS) with the adoption of the Carbon Credit Trading Scheme (CCTS) in July 2024.
    The national ETS will initially cover nine energy-intensive industrial sectors.

    The scheme focuses on emissions intensity, not absolute emissions caps.
    Credit Certificates will be issued to facilities that outperform benchmark emissions intensity levels.

 

The Carbon Credit Trading Scheme (CCTS) in India is a mechanism designed to reduce greenhouse gas (GHG) emissions through carbon pricing. It involves two key elements: a compliance mechanism for obligated entities (primarily industrial sectors) and an offset mechanism for voluntary participation. The CCTS aims to incentivize and support entities in their efforts to decarbonize the Indian economy. CCTS laid the foundation for the Indian Carbon Market (ICM) by establishing the institutional framework.

 

On March 28, 2025, India’s Ministry of Power approved 8 crediting methodologies for generating voluntary carbon credits including:

    Renewable Energy
    Green Hydrogen Production
    Industrial Energy Efficiency
    Mangrove Afforestation and Reforestation

 

The gradual transition from the current market-based energy efficiency program Perform, Achieve, and Trade scheme to these new programs is set to occur in 2025.

 

Comparison with Other Emerging Economies

 

Country
    

ETS Type
    

Coverage Sectors
    

Operational Status

India
    

Rate-based
    

9 industrial sectors
    

Regulatory stage

China
    

Rate-based
    

Power, cement, steel, aluminum
    

Operational

Brazil
    

Cap-based
    

All sectors except agriculture
    

Law passed in Dec 2024

Indonesia
    

Rate-based
    

Sectors expanded in 2024 to include Grid-connected coal/gas power plants
    

Operational

 

Development of a Domestic Voluntary Carbon Market

 

    India is developing a voluntary crediting mechanism alongside its ETS.
    Targeted at non-ETS sectors like agriculture, afforestation, clean cooking, etc.
    Aims to mobilize private capital for climate-positive projects.

 

Domestic Policy Backing

 

    Energy Conservation (Amendment) Act, 2022:
        Provided the legal basis for India's carbon market.
        Empowers the central government to issue carbon credit certificates.
    National Green Hydrogen Mission:
        Supported by carbon credit methodologies approved in March 2025.
        Targets production of 5 MMT of green hydrogen per annum by 2030.
    Perform, Achieve, and Trade (PAT):
        Implemented by the Bureau of Energy Efficiency (BEE) since 2012.
        Reduced emissions intensity in designated sectors by 15–25% over its lifecycle.
    Renewable Energy Targets:
        India aims to install 500 GW of non-fossil fuel-based capacity by 2030.

 

Government Steps to Strengthen Carbon Market Readiness

 

As highlighted during the COP 27, India balances its developmental needs with lower carbon emissions through Common but Differentiated Responsibilities and Respective Capabilities (CBDR-RC) principles. India’s efforts include:

    Mission LiFE and the Green Credit Program to promote a sustainable lifestyle.
    Creation of National Steering Committee for the Indian Carbon Market (NSCICM) and the Bureau of Energy Efficiency (BEE) under Ministry of Power.
    Incentives for private sector participation.

 

Mission LiFE

 

    What is Mission LiFE?: A global movement launched by India to promote sustainable living through mindful, eco-friendly daily habits, encouraging individuals to become “Pro-Planet People.”
    What does it do?: It nudges behavioural change (like saving energy, reducing plastic, and composting), influences markets, and drives policy reforms to support environmental sustainability.
    What are its goals? To mobilize 1 billion people globally to take individual and collective action for protecting and conserving the environment by 2028, transform 80% of Indian villages and urban bodies into green communities, and drive measurable climate impact.

 

Green Credit Program

 

1. What is GCP?: The Green Credit Rules, notified on October 12, 2023 under the Environment Protection Act, 1986, establish a voluntary, market-based mechanism to incentivize tree plantation on degraded forest lands, issuing Green Credits to participants, all managed via a digital portal and registry.

2. How it works:

    Land bank & selection: Forest departments register degraded forest parcels into a dynamic “land bank” on the GCP portal, from which participants choose plantation blocks.
    Who can join: Government bodies, PSUs, NGOs, companies, philanthropies, societies, and individuals registered on the portal can participate.
    Plantation & credits: After planting within two years—and maintaining for 10 years—credits are awarded based on planted trees, verified through digital tracking, field monitoring, and third-party audits.

3. Objectives: Key goals: Expand India’s forest/tree cover, build a comprehensive inventory of degraded land, and reward voluntary "pro‑planet" actions via Green Credits.

 

National Steering Committee for the Indian Carbon Market (NSCICM)

 

1. Governance & Oversight: The NSC-ICM brings together representatives from various ministries, state governments, and industry experts. It serves as the highest authority overseeing the establishment and functioning of India’s carbon market .

2. Core Functions: The Committee provides recommendations to the Bureau of Energy Efficiency on:

    Institutionalizing the carbon market (procedures, rules, and regulations)
    Formulating GHG emission intensity targets for obligated entities
    Setting guidelines for credit issuance, validity, renewal, and international trading
    Constituting working groups and monitoring market operations

 

Bureau of Energy Efficiency (BEE)

 

1. Purpose & Mandate: Established in 2002 under India’s Energy Conservation Act (2001), BEE is a quasi‑regulatory body mandated to spearhead national energy efficiency efforts. It develops policies, sets standards, monitors performance, and enforces compliance across key sectors—including industry, buildings, transport, and agriculture—to reduce energy intensity and greenhouse gas emissions.

2. Core Functions & Strategies: As a “systems operator,” BEE uses a mix of market‑based and regulatory tools to promote energy conservation. Its principal strategies include:

    Standards & labelling for appliances and equipment
    Energy codes for buildings
    Efficiency norms for industries
    Public awareness and capacity-building programs

 

Conclusion

 

India’s push toward a regulated carbon pricing mechanism, led by the Carbon Credit Trading Scheme and supported by the Energy Conservation Act and voluntary crediting initiatives, marks a crucial shift in its climate policy architecture. As global markets evolve and instruments like CBAM create external pressures, India is aligning its policies to maintain competitiveness while achieving climate goals. By focusing on emissions intensity rather than absolute caps, India’s rate-based ETS offers a pragmatic and flexible path forward, particularly for an economy balancing development with decarbonization. With robust domestic backing and a clear policy roadmap, India is well-positioned to emerge as a regional leader in carbon markets and contribute significantly to the global net-zero transition.

World Bank https://www.worldbank.org/en/publication/state-and-trends-of-carbon-pricing

United Nations Framework Convention on Climate Change https://unfccc.int/ttclear/misc_/StaticFiles/gnwoerk_static/TEC_NSI/9a7a705dd8824587b9ffb2731f1fdd53/723a50bd0329471ebae45eb33f1aa84e.pdf

Ministry of Environment, Forest and Climate Change https://www.pib.gov.in/PressReleasePage.aspx?PRID=2082528

Ministry of Power https://beeindia.gov.in/en/programmes/carbon-market

https://www.moefcc-gcp.in/about/aboutGCP

Niti Ayog https://www.niti.gov.in/sites/default/files/2022-11/Mission_LiFE_Brochure.pdf

Ministry of New and Renewable Energy https://www.pib.gov.in/PressReleaseIframePage.aspx?PRID=1897778

PIB Backgrounder Energizing the Future: https://www.pib.gov.in/FactsheetDetails.aspx?Id=149218

Invest India https://www.investindia.gov.in/blogs/indias-carbon-market-revolution-balancing-economic-growth-climate-responsibility

How to make the biggest public service serve Private Corporates https: //www.cenfa.org/how-to-make-the-biggest-public-service-serve-private-corporates-learn-from-bjp-government/  The Government under Narendra Modi issued a licence for a Payment Bank instead of a Universal Bank which could give loans also.

Though it was announced that 1,55,015 post offices and 3,00,000 postmen will provide doorstep banking services, it has not been done. Now Airtel Payment Bank has 5,00,000 neighbourhood banking units and more than 155 million users. On the contrary, IPPB has 90 million users.

As no loans can be provided by a Payment Bank, IPPB has become an agent of Axis Bank, FIBE, HDFC Bank and Aditya Birla Capital Ltd for personal loans. 

What is more shocking is that the IPPB has signed a strategic partnership with Aditya Birla Capital Ltd, a small NBFC. This will help the private lender to use the services of the present number of 1,64,972 post offices and lend its customers at a high rate of interest. More such are likely to come.

IPPB could have become the biggest public sector bank serving people in their 89% rural branches. Instead, it’s given on a platter to the private sector to exploit. 

Report of the Special Rapporteur on the situation of human rights in the Palestinian territories occupied since 1967,https://www.un.org/unispal/document/a-hrc-59-23-from-economy-of-occupation-to-economy-of-genocide-report-special-rapporteur-francesca-albanese-palestine-2025/ 
Francesca Albanese

    The Special Rapporteur urges Member States:

(a)      To impose sanctions and a full arms embargo on Israel, including all existing agreements and dual-use items such as technology and civilian heavy machinery;

(b)     To suspend/prevent all trade agreements and investment relations, – and impose sanctions, including asset freezes, on entities and individuals involved in activities that may endanger the Palestinians;

(c)      To enforce accountability, ensuring that corporate entities face legal consequences for their involvement in serious violations of international law.

    The Special Rapporteur urges corporate entities:

(a)      To promptly cease all business activities and terminate relationships directly linked with, contributing to and causing human rights violations and international crimes against the Palestinian people, in accordance with international corporate responsibilities and the law of self-determination;

(b)     To pay reparations to the Palestinian people, including in the form of an apartheid wealth tax along the lines of post-Apartheid South Africa.

    The Special Rapporteur urges the International Criminal Court and national judiciaries to investigate and prosecute corporate executives and/or corporate entities for their part in the commission of international crimes and laundering of the proceeds from those crimes.
    The Special Rapporteur urges the United Nations:

(a)      To comply with the International Court of Justice Advisory Opinion of 2024;

(b)     To include all entities involved in Israeli unlawful occupation in the United Nations database (to be accessible on the OHCHR website).

    The Special Rapporteur urges trade Unions, lawyers, civil society and ordinary citizens to press for boycotts, divestments, sanctions, justice for Palestine and accountability at international and domestic levels; together we can end these unspeakable crimes.
    This report is written at the cusp of a profound and tumultuous transformation. Globally witnessed atrocities require urgent accountability and justice, which demands diplomatic, economic, and legal action against those who have maintained and profited from an economy of occupation turned genocidal. What comes next, depends on all of us.