India CCTS: Market Outlook & Compliance Management

Recorded

5 March 2026

Format

On-Demand

Price

Free

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Deep-Dive Article Series

India CCTS: The Complete Guide

Go deeper with our 14-part article series covering every aspect of India's Carbon Credit Trading Scheme — from regulatory framework and sector-by-sector compliance analysis to market outlook and CBAM alignment.

Global Context: Lessons from Compliance Markets

Elton Lawes opened the session by placing India's CCTS within the broader global landscape. With 24 years at Nova Chemicals — 20 of them navigating large-emitter regulations — Elton brought first-hand experience from Alberta's compliance carbon market to contextualise what Indian industry can expect.

There are now roughly 95 jurisdictions worldwide with some form of greenhouse gas compliance program, covering approximately 28% of global emissions. These programs broadly fall into two categories: cap-and-trade systems (like the EU ETS) and baseline-and-credit systems. India's CCTS is the latter — an intensity-based system where obligations are set relative to emissions output, not absolute caps.

Elton stressed that new programs are inherently volatile: rules change, benchmarks get adjusted, and sectors can find themselves in unexpectedly strong or weak positions. The lesson for Indian industry is clear — engage early, advocate for fair benchmarks, and build the internal infrastructure to manage what is fundamentally a new cost of doing business.

How India's CCTS Works

Abhishek Das walked the audience through the regulatory architecture of the scheme. India's carbon market journey began with the PAT (Perform, Achieve, Trade) energy efficiency mechanism in 2012. The major turning point came with the Energy Conservation Amendment Act in December 2022, which laid the legal foundation for a nationwide carbon market. The CCTS was notified in June 2023 and is administered by the Bureau of Energy Efficiency (BEE).

India's CCTS is an intensity-based carbon market, meaning obligations are set based on emissions output per unit of production — not absolute emissions. Each obligated facility receives a GHG Emissions Intensity (GEI) benchmark. If a facility performs better than its benchmark, it generates Carbon Credit Certificates (CCCs). If it exceeds the benchmark, it must purchase and surrender CCCs to cover the shortfall.

Covered sectors include cement, iron and steel, aluminium, petrochemicals (both refinery and crackers), pulp and paper, and more — collectively accounting for nearly 750 million tonnes of CO₂ and over 740 facilities. The penalty for non-compliance is twice the prevailing market price, making it fundamentally driven by pricing and market dynamics.

The market will be split into two segments: the compliance market (for obligated entities that must meet emission targets) and the offset market (for voluntary participants). All trading will happen on power exchanges to ensure transparency and proper price discovery. The latest notification — the Carbon Credit Certificate Regulation of 27 February 2026 — confirmed that one CCC equals one tonne of CO₂ reduction, with floor and ceiling prices to be established.

Early-Stage Challenges: What to Expect

Drawing from his decades of experience in Canada, Elton outlined the key challenges companies will face in the early years of the CCTS — from data and MRV infrastructure gaps to price discovery risk and verification bottlenecks.

On the data front, most industrial metering is designed to run plants, not to quantify greenhouse gas emissions. Upgrading measurement infrastructure — particularly at older facilities — can require shutdowns costing between $500,000 and $3 million. Verification is another bottleneck: training verifiers, getting consistency across companies, and having enough qualified professionals to serve the entire market takes time.

Elton also emphasised the need to think in multi-year horizons. Being “long” on credits today may seem comfortable, but if you sell those credits and stringency tightens, you could face a deficit in five years at a much higher price. Companies need to manage the risk of future compliance, the risk of losing credit value, and the governance systems to treat carbon like any other cost of operating.

Market Outlook: Three Scenarios

Abhishek presented Climate Decode's proprietary market modelling, which projects the CCTS supply-demand balance under three distinct scenarios. All three share the same structural assumptions — benchmarks, emissions intensity improvements, and production factors — but diverge on decarbonisation pace and technology adoption.

Base Case: The most likely pathway. Production growth aligns with historical trends and there is moderate decarbonisation progress based on India's net zero goal of 2070. The market begins FY 2025–26 with a surplus of around 4.3 million CCCs (largely digital and transitional). By FY 2027–28, the surplus erodes and the system moves into a deficit, reaching nearly 10 million CCCs annually by the end of the decade. Iron and steel become the dominant source of demand as benchmark tightening and production volumes scale.

Supply Heavy: Faster technology adoption and stronger efficiency gains generate more credits. The market remains long through the modelling period, with an annual surplus of 8–9 million and cumulative surplus around 14 million CCCs by 2030. Prices stay weak and near the floor, with minimal trading activity — reducing the scheme's effectiveness as a decarbonisation tool.

Supply Constraint: Slower decarbonisation due to capital and technology barriers. Shortfall emerges by FY 2026–27, reaching 20 million CCCs annually by FY 2029–30. Credit prices hit the ceiling, liquidity stress emerges, and most sectors face significant compliance pressure. In this scenario, the government would likely need to intervene through benchmark adjustments or offset integration.

Pricing Outlook

With no CCTS trading having occurred yet, Climate Decode anchored its pricing model on two references: India's existing PAT scheme (which previously measured energy intensity) and the China ETS, the closest comparable intensity-based market.

Under the base case, early-year CCC prices are estimated between ₹710 and ₹1,165 per tonne of CO₂ in the first transition year, when the market carries a surplus. As the system tightens and moves into deficit, prices are expected to reach approximately ₹4,000 per tonne by 2030.

The transition is significant: the market moves from a learning phase with relatively low prices to a structurally tighter compliance market with clear pricing signals. For companies, the early years represent a window to build compliance capability and position before prices rise meaningfully.

Sectoral Winners & Losers

Abhishek presented Climate Decode's sectoral emissions treemap, showing that iron and steel, cement, and power (indirectly through Scope 2) account for around 80% of the compliance market's emissions. This sectoral balance ultimately determines market liquidity, trading patterns, and price formation.

From the supply side, cement remains structurally long and is likely to be the largest and most stable source of surplus credits. On the demand side, iron and steel is expected to become the dominant driver of credit demand by the late 2020s as benchmark tightening and production volumes scale — particularly since iron and steel GEI notifications are still not finalised.

The initial phase of the CCTS focuses on marginal improvement rather than aggressive decarbonisation, with GEI targets reduced between 1.6% and 3% depending on the sector. While this makes the first year manageable, targets will tighten after the initial transition — and companies that delay building compliance infrastructure will find themselves at a significant disadvantage.

Climate Decode's Platform: TerraNova for CCTS

Koorosh Behrang closed the session by demonstrating how Climate Decode's TerraNova platform addresses the operational complexity of CCTS compliance. The core challenge: CCTS requires facilities to collect and organise a large volume of activity data and emission information, typically through detailed Excel-based reporting templates managed across fragmented systems.

TerraNova integrates operational data sources — internal databases, Excel files, enterprise systems like SAP — directly into the platform and organises it according to CCTS requirements. Companies can view data through facility-level and corporate-level dashboards to monitor monthly performance, track emission intensity, and make course corrections throughout the year rather than only at reporting time.

The platform's Compliance Manager provides a five-year enterprise-level forecast, allowing organisations to understand whether they are likely to be in a surplus or deficit position. It supports strategic decisions like buying credits, selling surplus credits, or banking credits for future compliance periods — all informed by Climate Decode's market outlook and pricing forecasts.

Audience Q&A Highlights

The session concluded with an extended Q&A covering some of the most pressing questions from participants. Here are the key discussions:

Will higher oil and gas prices affect CCTS compliance?

Elton explained that many industries rely on fuel switching (e.g., coal to natural gas) as a common decarbonisation pathway. If natural gas prices rise, that switch becomes less economically viable — potentially making it cheaper to simply pay for compliance credits rather than invest in cleaner fuels. This creates a tension between energy prices and decarbonisation incentives that companies need to model carefully.

Why is the power sector not directly included?

Power is indirectly included through Scope 2 emissions — covered facilities must account for electricity or heat consumption. But as Elton noted, power is treated differently in almost every program globally because of its fundamental role in the economy. Including it as a regulated sector adds a different dynamic that most jurisdictions handle separately.

Are credits fungible across sectors?

Yes — the CCTS is designed as a national carbon market where CCCs are fungible across sectors. This allows industries such as cement, steel, aluminium, and pulp and paper to trade supply and demand across the full market, creating a common price signal and improving liquidity over time.

Could CCTS link with international markets or Article 6?

Koorosh explained that market linkage is a complex process requiring compatible designs, and India's CCTS is still in its early stages. On the voluntary side, there is opportunity to link offset credits to Article 6 mechanisms. But the compliance market will likely remain domestic for the foreseeable future. Carbon border adjustments (CBAM) could eventually push alignment between programs, but that is a longer-term consideration.

How does India's CCTS differ from other programs?

Elton drew direct parallels with Alberta's TIER program. The math and intensity-based calculations are very similar, but the 10% of differences — such as how power is integrated and whether benchmarks are facility-specific or industry averages — can lead to significant differences in compliance costs and outcomes.