Carbon Credit Scheme

Introduction

India just got its first mandatory carbon market. The Carbon Credit Trading Scheme (CCTS) — often referred to as the backbone of the Indian Carbon Market (ICM) — is moving from policy design into active implementation through 2026, and it's reshaping how energy-intensive industries plan investments, manage emissions, and think about renewable energy adoption.

This guide breaks down what the Carbon Credit Scheme actually is, how carbon trading works under it, current carbon credit prices, who needs to comply, and how it connects to the solar and renewable energy industry.

What Is the Carbon Credit Trading Scheme (CCTS)?

The Carbon Credit Trading Scheme is India's national, market-based mechanism for pricing greenhouse gas (GHG) emissions. It was notified by the Government of India in June 2023 under powers granted by the Energy Conservation (Amendment) Act, 2022, with detailed compliance regulations adopted in July 2024. As of January 2026, the scheme has entered its critical implementation stage.

Under CCTS, a carbon credit is officially defined as a value assigned to a reduction, removal, or avoidance of greenhouse gas emissions, equivalent to one tonne of carbon dioxide equivalent (tCO2e).

The scheme's stated goals are to:

1. Accelerate the decarbonization of the Indian economy
2. Help India meet its Nationally Determined Contributions (NDCs) under the Paris Agreement — specifically, reducing emission intensity by 45% by 2030 compared to 2005 levels
3. Replace India's earlier energy-efficiency-only approach (the PAT scheme) with a more accurate, emissions-based trading mechanism
4. Give companies a genuine financial incentive to shift from cheap, high-emission energy sources toward cleaner alternatives

CCTS effectively replaces the older PAT (Perform, Achieve and Trade) scheme, which focused only on energy efficiency. Between 2015 and June 2024, PAT and its ESCert mechanism helped India achieve more than 106 million tonnes of CO2 emission reductions — a track record CCTS builds directly on, alongside India's long experience with the Clean Development Mechanism (CDM), where it holds the second-largest number of registered projects globally.

How Carbon Trading Works Under CCTS: Two Streams

1. Compliance Mechanism (Mandatory)

This applies to specific energy-intensive sectors notified by the Bureau of Energy Efficiency (BEE). Currently, 461 companies across nine energy-intensive sectors are required to comply.

Each obligated facility is assigned a Greenhouse Gas Emission Intensity (GEI) target — measured in tCO2e per unit of output, not a hard emissions cap. Companies that beat their target earn tradable Carbon Credit Certificates (CCCs); companies that miss their target must purchase CCCs to cover the shortfall.

GEI reduction targets (using FY 2023-24 as baseline):

2. Offset Mechanism (Voluntary)

This allows non-obligated entities — including renewable energy project developers, forestry projects, and other emission-reduction initiatives — to register GHG reduction projects under ICM governance and generate credits, even though they aren't legally required to participate. These offset credits, however, cannot be used to meet mandatory compliance obligations — the two pillars of the scheme are kept strictly separate to preserve market integrity.

Who Should Comply? Sectors Covered Under CCTS

Who is NOT currently obligated:

1. Small and medium enterprises outside these nine sectors
2. Solar, wind, and other renewable energy generators (these can participate voluntarily via the Offset Mechanism, but have no mandatory obligation)
3. Residential and commercial electricity consumers
4. Any company not specifically notified by BEE as a covered entity, regardless of size, if it falls outside the nine listed sectors

Who CAN voluntarily participate:

1. Renewable energy project developers (solar, wind, and other clean generation)
2. Forestry and land-use / afforestation projects
3. Any organization implementing a verifiable, ACVA-certifiable GHG reduction project

How Carbon Credit Certificates (CCCs) Are Traded

1. All CCC trading takes place on supervised power exchanges — there is currently no over-the-counter (OTC) trading, which is designed to ensure price transparency and prevent manipulation.
2. Emissions and reductions must be verified by Accredited Carbon Verifiers (ACVAs) before credits are issued.
3. BEE is expected to require reasonable assurance for compliance-market entities, with limited assurance accepted for smaller offset projects during the initial compliance cycles.

Some industry commentators describe CCTS as India's new "green stock exchange" — companies that decarbonize efficiently earn tradable certificates, while companies that lag behind must pay to cover their shortfall, creating a direct financial transfer from high-emission laggards to low-emission leaders.

Carbon Credit Prices in India

Since large-scale compliance trading under CCTS is still ramping up, pricing remains highly variable and market-driven.

Factors that influence carbon credit pricing globally, and likely to shape Indian pricing as the market matures:

1. Project type (renewable energy, forestry, industrial efficiency, direct air capture, etc.)
2. Vintage (how recently the credit was issued)
3. Certification standard used
4. Whether the credit trades in a compliance market or a voluntary market

As India's compliance market matures and trading volumes grow, prices are expected to become more stable and transparent — though early-stage price discovery in any new trading scheme tends to be volatile.

The CBAM Connection: Why This Matters for Exporters

One of the biggest drivers behind CCTS's urgency is the European Union's Carbon Border Adjustment Mechanism (CBAM). Starting January 1, 2026, CBAM requires importers of certain carbon-intensive goods into the EU to purchase certificates covering the embedded emissions in those goods, priced at the weekly average EU ETS auction rate.

1. Without a domestic carbon price, Indian exporters would effectively pay this carbon tax entirely to the EU.
2. With CCTS, if India can demonstrate an effective, transparent, and verifiable domestic carbon price, Article 9 of the CBAM regulation allows a deduction — meaning Indian exporters could pay a lower, domestic carbon price instead of the full EU rate, avoiding a form of double taxation.
3. The United Kingdom has already officially recognized CCTS as a qualifying carbon pricing framework under its own CBAM, a significant international validation of the scheme.

International Linkages: Article 6 and ITMOs

CCTS has also been designed with international carbon market linkage in mind. Under Article 6.2 of the Paris Agreement, countries can engage in bilateral cooperative approaches involving Internationally Transferred Mitigation Outcomes (ITMOs). India has been actively exploring how its domestic carbon market could connect with these international mechanisms — a step that could open additional revenue channels for Indian emission-reduction projects in the future.

Why This Matters for the Renewable Energy and Solar Industry

1. New revenue stream for renewable energy projects. Solar and wind project developers can potentially register emission-reduction outcomes under the voluntary Offset Mechanism, creating an additional income stream beyond power sale revenue — though these offset credits cannot be sold into the mandatory compliance market.
2. Growing corporate demand for clean power. As energy-intensive companies work to hit their GEI targets, demand for renewable energy — including rooftop solar, open access solar, and captive power — is likely to increase as a direct decarbonization lever.
3. A market-based case for going solar. For industrial and commercial businesses facing GEI targets, switching from grid or diesel power to solar isn't just about electricity cost savings anymore — it becomes a direct input into meeting a regulatory emissions target.
4. Early-mover advantage. Businesses that build carbon accounting and MRV capability now — ahead of sector expansion into more industries — will be better positioned as CCTS obligations broaden over time.

How UrjaOne Helps Customers Navigate This Shift

For businesses in the nine notified sectors — or any company simply looking to reduce its carbon footprint ahead of future regulation — UrjaOne makes it easier to act on the CCTS opportunity:

1. Find verified solar and energy consultants who understand both renewable energy procurement and how it ties into emissions-reduction planning
2. Access Open Access and captive solar consultants through the platform, since shifting to renewable power is one of the most direct ways to reduce GHG emission intensity for GEI-obligated companies
3. Compare vendors and energy auditors via verified company profiles, certifications, and reviews — useful when selecting a partner for both solar installation and emissions/energy audit needs
4. Use the Document Management tools on the platform to organize compliance-related paperwork, certifications, and renewal reminders alongside your solar project documentation

How UrjaOne Helps Vendors Reach This Growing Market

For solar EPCs, energy auditors, and consultants, CCTS represents a genuinely new customer motivation — companies that previously bought solar only for bill savings are now also buying it to manage a regulatory emissions target. UrjaOne helps vendors capture this demand by:

1. Delivering verified leads from businesses in energy-intensive sectors exploring renewable energy as part of their decarbonization strategy
2. Providing industry news and tender updates, so energy auditors and consultants stay current on evolving CCTS sector coverage and GEI targets — a genuine differentiator when pitching to C&I clients
3. Offering a free company profile and marketplace listing, helping specialized services like energy audits and open access consulting get discovered by companies actively searching for compliance support
4. Enabling document management tools to help you manage client compliance documentation alongside project files, professionally and securely

If you're an energy auditor, solar EPC, or Open Access consultant looking to reach businesses navigating CCTS compliance, you can register as a UrjaOne partner to start receiving verified leads in your service area.

Frequently Asked Questions

1. What is the Carbon Credit Trading Scheme (CCTS)? CCTS is India's national, market-based mechanism for pricing greenhouse gas emissions, notified in June 2023 under the Energy Conservation (Amendment) Act, 2022. It issues tradable Carbon Credit Certificates to companies that beat their emissions intensity targets.
2. What is the current carbon credit price in India? Prices are still market-driven and highly variable, with current estimates in the range of roughly ₹600–900 per tonne of CO2 equivalent. Pricing is expected to stabilize as trading volumes grow on the supervised power exchanges.
3. Which sectors are covered under CCTS, and who should comply? Nine energy-intensive sectors: aluminium, cement, chlor-alkali, pulp and paper, iron and steel, petroleum refining, petrochemicals, and textiles, covering 461 notified companies as of the current compliance cycle. Coal-fired power generation is planned for future inclusion. Companies outside these sectors have no mandatory obligation, though they can participate voluntarily.
4. Can any company earn carbon credits, or only the notified sectors? Non-obligated entities, including renewable energy developers, can register GHG reduction projects under the voluntary Offset Mechanism and earn credits, but these offset credits cannot be used to meet mandatory compliance obligations under the Compliance Mechanism — the two are kept separate.
5. How does CCTS relate to the EU's carbon border tax (CBAM)? CBAM requires EU importers to pay for the embedded emissions in certain imported goods starting January 2026. If India's CCTS carbon price is recognized as valid, Indian exporters may be able to deduct what they've already paid domestically, avoiding paying the full carbon cost twice. The UK has already recognized CCTS for this purpose.
6. Is carbon credit trading in India open to the public, or only large companies? Currently, mandatory compliance trading applies only to designated large industrial entities in the nine notified sectors. However, the voluntary offset mechanism is open to other organizations running verifiable emission-reduction projects, including renewable energy developers.