New Delhi: In a significant move to strengthen its climate action framework, the Indian government has substantially widened the scope of the domestic carbon market by establishing greenhouse gas emission intensity (GEI) targets for 208 additional carbon-intensive industrial units. This expansion brings more key industries under the nation's carbon compliance mechanism, marking a pivotal step in India's decarbonization journey.
Broadening the Compliance Framework
A notification issued on January 13 has brought petroleum refineries, petrochemicals, textiles, and secondary aluminum sectors under the compliance mechanism of the Carbon Credit Trading Scheme (CCTS). These industries are now required to meet specific emission targets or purchase carbon credits to offset any excess emissions they generate.
With this latest inclusion, a total of 490 obligated entities across India's most emission-intensive sectors are now covered under the compliance framework of the Indian carbon market. This follows an earlier notification in October 2025, when the government had set GEI targets for 282 obligated entities in sectors including aluminum, cement, chlor-alkali, and pulp & paper.
From Voluntary Action to Accountable Decarbonization
Manish Dabkara, chairman and managing director of EKI Energy Services and president of the Carbon Markets Association of India, emphasized the significance of this development. "Bringing petroleum, petrochemicals, textiles, and secondary aluminum under the compliance mechanism of the Indian carbon market marks a decisive shift from voluntary climate action to accountable, economy-wide decarbonization. This is no longer about a few early movers; it is about embedding carbon efficiency into the core of India's industrial growth," he stated.
Dabkara further explained that by expanding GEI targets to 490 of the country's most emission-intensive entities, India is signaling that carbon performance will now shape industrial competitiveness, capital access, and long-term resilience. "The real test ahead will be execution, data integrity, and market discipline, but this framework gives India the architecture to deliver," he added.
Understanding the Carbon Credit Trading Scheme
The Carbon Credit Trading Scheme, notified in 2023, provides the overarching framework for the functioning of India's carbon market. This innovative scheme aims to reduce or avoid greenhouse gas emissions across various sectors of the Indian economy by assigning a price to emissions through a market-based carbon credit trading mechanism.
The CCTS operates through two distinct routes:
- Compliance Mechanism: Designated emission-intensive industries, known as obligated entities, are required to achieve prescribed GEI reduction targets. Entities that exceed their targets are awarded Carbon Credit Certificates, which can be sold to entities that fall short of their mandated goals.
- Offset Mechanism: This voluntary system allows non-obligated entities (those not directly regulated by CCTS targets) to earn carbon credit certificates by developing projects that reduce, avoid, or remove greenhouse gas emissions.
Industry Perspectives on Implementation
According to experts, the notification on GEI targets for carbon-intensive sectors represents a timely and meaningful action to accelerate India's journey toward net zero emissions. Compliance will compel industries to adopt measurable and reliable pathways for emission reduction.
Piyush Goyal, co-founder and chief executive officer of Volks Energie, highlighted practical approaches for industries to meet these new requirements. "On-site renewables, high-performance HVAC (heating, ventilation, and air conditioning) systems, and battery energy storage systems can directly cut both emissions and costs. For early adopters, the transition shall not only be about compliance but building long-term resilience and increasing their global competitiveness. Efficiency upgrades, electrification, and smarter energy management will be the way forward," he explained. Volks Energie provides integrated energy solutions, specializing in solar power installation, design, and maintenance, along with HVAC systems.
Sustained Engagement and Future Outlook
According to government sources, the expansion of sectoral coverage reflects sustained engagement with industry stakeholders, detailed technical assessments, and coordinated efforts among institutions. As the compliance mechanism widens and matures, the Indian carbon market is expected to play a crucial role in balancing industrial growth with India's long-term climate commitments and its net-zero emissions pathway.
The offset mechanism in the CCTS incentivizes projects in areas like renewable energy, energy efficiency, and afforestation, allowing businesses to generate revenue from verified emission reductions. This contributes significantly to India's net-zero goals while promoting sustainable development across various sectors.
India's Climate Commitments
India has established an ambitious net-zero target for 2070, aiming to balance greenhouse gas emissions with removals so that overall emissions become neutral. The expansion of the carbon market represents a critical component of this comprehensive strategy, creating market-based incentives for emission reduction while supporting industrial growth and competitiveness in a decarbonizing global economy.
