India's first compliance-based carbon market set to take shape with draft notification
In a significant move towards decarbonising high-emission industries, the Ministry of Environment, Forest and Climate Change (MoEFCC) has issued a draft notification to establish India's first compliance-based domestic carbon market.
This market, structured under the Carbon Credit Trading Scheme (CCTS) of 2023, seeks to drive industrial adoption of low-carbon technologies and support the country's broader climate goals.
The draft notification outlines Greenhouse Gas Emission Intensity (GEI) Targets for 2025, applying to sectors such as aluminium, cement, chlor-alkali, and pulp and paper. These targets include specific reduction goals for the financial years 2025-26 and 2026-27, aimed at enabling year-wise sectoral decarbonisation.
The government had introduced the CCTS in June 2023 to establish a regulatory framework for carbon credit trading and to facilitate emission reductions in line with India's commitments under international climate agreements.
A total of over 290 entities operating in traditionally high-emission sectors are covered under the draft. A uniform formula has been proposed to calculate and verify emissions, alongside sectoral benchmarking applicable to both integrated operations and standalone units.
The aluminium sector includes companies such as Vedanta, Hindalco, and NALCO, covering sub-sectors like smelters and refineries. In the cement industry, the notification lists UltraTech, ACC, Ambuja, Dalmia, and JSW Cement, producing ordinary Portland and white cement. The pulp and paper industry has also been included, with emphasis on agro-based, integrated, and recycled fibre-based plants.
The chlor-alkali industry, which involves the electrolysis of saltwater to produce chlorine and sodium hydroxide for industrial uses, is also addressed under the draft.
Industry associations have lauded the move, calling it a long-awaited step toward a formal carbon market in the country.
'For the first time, India will have a domestic framework that quantifies emissions across sectors that matter,' said Manish Dabkara, President of the Carbon Markets Association of India and Chairman at EKI Energy Services. 'The notification not only allows for trading credits but also enables companies to reduce in-house emissions, creating space for strategic planning beyond mere compliance,' he added.
The MoEFCC has invited public comments on the draft over a two-month consultation period.
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