In a strategic push to reduce industrial greenhouse gas (GHG) emissions, the government has introduced emission intensity targets under the newly operational Carbon Credit Trading Scheme (CCTS). Targeting eight energy-intensive sectors—steel, cement, aluminium, textiles, petrochemicals, oil refineries, paper and pulp, and chlor-alkali – the scheme aims to foster low-carbon growth through a mix of regulation and market-based incentives.
How the Scheme Works
Launched under the Energy Conservation (Amendment) Act of 2023, the CCTS allows industries that outperform their emissions benchmarks to earn tradable carbon credit certificates. Conversely, companies that fail to meet targets must purchase credits or risk facing penalties. The scheme is modelled on the earlier Perform, Achieve, and Trade (PAT) mechanism, which successfully reduced energy intensity in several sectors by enabling the trade of efficiency certificates.
Past Lessons and Present Limitations
While PAT delivered aggregate reductions in energy use, plant-level assessments revealed uneven performance across facilities. Experts caution that CCTS may face similar challenges, particularly given the modest targets set for the initial compliance period.
From 2023–24 to 2026–27, CCTS mandates only a 1.68% annual reduction in emissions intensity. This is considerably lower than the projected 2.53% industry-wide reduction and falls short of the 3.44% annual decline needed in the power sector to align with India’s net-zero target by 2070. Critics argue that such lenient targets could undermine the credibility of India’s Nationally Determined Contributions (NDCs), which call for a 45% cut in emissions intensity by 2030 (from 2005 levels).
Gaps in Coverage: Sectors Left Behind
Another major limitation of the CCTS is its narrow scope. Key emitters such as the power sector, transport, agriculture, MSMEs, and thermal power plants remain outside the framework. This significantly restricts the scheme’s potential for economy-wide decarbonization. Environmental analysts suggest that without comprehensive sectoral inclusion, the scheme risks becoming a compliance tool rather than a transformational instrument for carbon reduction.
The Road Ahead: Strengthening the CCTS Framework
To maximize its impact, experts recommend a series of forward-looking measures:
- Tighten emissions targets progressively to match national and sectoral decarbonization pathways
- Expand coverage to include currently excluded sectors such as power and agriculture
- Implement global best practices in monitoring, reporting, and verification (MRV)
- Link CCTS benchmarks directly with India’s NDC and net-zero modeling frameworks
As reported by knnindia.co.in, by evolving into a holistic, economy-wide carbon market, the CCTS can play a pivotal role in India’s low-carbon growth strategy, while aligning policy instruments with its international climate commitments.
