India's Comprehensive Carbon-Trading Programme
India is preparing to launch its first comprehensive carbon-trading programme, targeting emissions from participating industries. The programme is set for the fiscal year April 2025-March 2026, with verification interviews currently ongoing.
Key Highlights
- Initially, 490 units across seven sectors have been issued emission targets, as per notifications in October 2025 and January 2026.
- The steel and fertiliser sectors are proposed for inclusion but are not part of the initial phase covering approximately 800 units responsible for nearly all industrial emissions in India.
- The power sector, despite being the largest polluter, is excluded from this scheme.
Programme Cycle
The first cycle of FY26 targets concludes on March 31, 2026. Verification and assessment will follow, with credits expected to be issued by October 2026. Trading is anticipated from November to January, on an annual cycle.
Participation and Registration
A portal launching on March 20 will facilitate project registration and scheme participation, aiming for transparency and ease of use.
Market Mechanism
- The scheme will create a compliance carbon market with tradable carbon-credit certificates linked to emission-intensity targets.
- This allows efficient performers to monetize surplus reductions while offering flexibility to others through trading.
Coverage and Notifications
- The October 8, 2025 notification included 281 units across sectors like aluminium and cement.
- The January 13, 2026 notification covered 208 units in sectors such as petroleum refineries and textiles.
International Context
India's scheme is partly a response to the EU's Carbon Border Adjustment Mechanism (CBAM) to avoid carbon taxes on exports.
Components of the Scheme
- Consists of a mandatory compliance component covering 800 units in nine sectors, and a voluntary offset component.
- Targets are issued for a three-year duration under the compliance scheme.
Voluntary Offset Programme
- The government is advancing this with nine published methodologies and 15 more in progress, including carbon capture and nature-based solutions.
- Project-design documents from two companies are under evaluation for carbon-credit eligibility.
Cost and Pricing
- Targets are set considering marginal abatement costs, aiming to maintain carbon costs around $10 per tonne of CO2, compared to over $75 in the EU and around $10 in China.
- There is a need to balance the credit price to avoid making it too low or too high, impacting competitiveness or emission incentives.
