The Carbon Credit Trading Scheme (CCTS) is India’s national framework to decarbonize the economy by pricing greenhouse gas (GHG) emissions via the Indian Carbon Market (ICM). Established under the Energy Conservation (Amendment) Act, 2022, it replaces the earlier Perform, Achieve, and Trade (PAT) scheme.

Key Features & Framework Upgrades

• Shift from Energy Efficiency to GHG Emission Intensity: Replaces PAT’s focus on energy efficiency (ESCerts) with target-driven reductions in GHG emission intensity (GHG emissions per unit of output).
• Carbon Credit Certificate (CCC) Valuation: 1 tradable CCC represents a verified reduction of 1 tonne of CO2 equivalent.
• Initial Energy-Intensive Covered Sectors: Targets high-emission industries (iron & steel, aluminium, cement, fertilizers, petroleum refineries, pulp & paper, and textiles), with the power sector planned for future inclusion.

Two-Tier Market Structure: Mandatory Compliance vs. Voluntary Offsets 

• Mandatory Target-Based Compliance Mechanism: Obligated sectors must meet strict GHG reduction targets. Exceeding targets earns surplus CCCs to sell, while missing targets requires purchasing credits to maintain compliance.
• Voluntary Project-Based Offset Mechanism: Allows non-obligated entities to generate and sell carbon credits through verified emission-reduction projects outside mandatory obligations.

Significance and Objectives

• Climate Commitments: Accelerates India’s progress toward its target of lowering national emission intensity.
• Green Investment: Establishes a transparent carbon price, driving the adoption of clean technologies, renewable energy, and low-carbon practices.
• Global Trade Alignment: Shields domestic exporters against international carbon tariffs, such as carbon border adjustment mechanisms.