If you run a factory or an energy-intensive business in India, you’ve probably heard the term “carbon credit trading scheme” lately. That’s not a coincidence. India now has its own mandatory carbon market. It’s already changing how large industries plan, budget, and report emissions. But here’s what most people miss: this isn’t only for big industry. MSMEs, startups, farmers, and even individual landowners can take part too — and potentially earn from it. Let’s break down what CCTS is, who it applies to, and where the opportunity lies.
What Is the Carbon Credit Trading Scheme (CCTS)?
Carbon Credit Trading Scheme (CCTS): India’s national framework for trading Carbon Credit Certificates (CCCs), notified by the Ministry of Power on 28 June 2023, under the Energy Conservation (Amendment) Act, 2022.
The scheme gets its legal power from Section 14AA, which this amendment act inserted into the Energy Conservation Act, 2001. That section lets the Central Government notify a carbon trading scheme — and the June 2023 notification, along with later amendments and BEE’s procedures, together form the full rulebook of what’s now called the Indian Carbon Market (ICM). Here’s how it works, in simple terms:
- Every large industrial unit gets a target for how much GHG it can emit per unit of output.
- Beat the target, and you earn CCCs — which you can sell.
- Miss the target, and you must buy CCCs or pay a penalty.
This is India’s first mandatory carbon market. It replaces the older Perform, Achieve and Trade (PAT) scheme, which only tracked energy efficiency, not carbon.
Why Was CCTS Introduced?
CCTS didn’t appear out of nowhere. It grew out of an older scheme, and that history explains a lot about how it works today.
From energy savings to carbon pricing
The PAT scheme, launched in 2012, rewarded industries for using less energy per unit of output. It worked well for over a decade. But it never put an actual price on carbon emissions — only on energy use.
CCTS builds on PAT’s base of over 1,000 entities across 13 sectors. These sectors are now moving from PAT to CCTS, step by step.
India’s bigger climate goal
CCTS also ties into India’s broader climate commitments — the updated Nationally Determined Contributions (NDCs) and the Long-Term Low-Emission Development Strategy submitted to the United Nations. India has committed to cutting the emissions intensity of its GDP by 45% by 2030, compared to 2005 levels. CCTS is the main tool meant to get India there, without slowing down industrial growth.
Built for scale
Once fully active, CCTS is expected to cover more than 700 million tonnes of CO2e. That would place India among the largest carbon markets in the world, alongside the EU and China.
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Who Is Covered Under CCTS?
Not every business is required to comply. CCTS currently applies to these nine energy-intensive sectors:
- Aluminium (including secondary aluminium)
- Cement
- Chlor-alkali
- Fertiliser
- Iron and steel
- Pulp and paper
- Petrochemicals
- Petroleum refineries
- Textiles
Four of these — petroleum refineries, petrochemicals, textiles, and secondary aluminium — were added recently, in January 2026.
The Two Mechanisms Under CCTS
CCTS actually runs two separate tracks, sharing the same registry and trading infrastructure but working under different rules. This dual design is the most important thing to understand before deciding how your business fits in.
| Mechanism | Who it’s for | How it works |
| Compliance Mechanism | Obligated entities in 9 sectors | Mandatory targets, set sector-by-sector and product-by-product. Beat the target, earn CCCs. Miss it, buy CCCs from other obligated entities or pay a penalty. |
| Offset Mechanism | Everyone else — MSMEs, startups, NGOs, farmers, landowners | Voluntary. Register a project against an approved methodology, get it verified, and earn CCCs. |
The offset mechanism is the part most small businesses and individuals miss. It’s genuinely open to MSMEs, startups, NGOs, farmers, and landowners running eligible projects. One honest catch: certification costs can be steep for a single small project, so it often helps to combine multiple sites or activities together.
Who Runs The Indian Carbon Market?
Four to five institutions share the work, each with a clearly defined role. This keeps power spread out, so no single body controls target-setting, verification, record-keeping, and trading all at once.
- National Steering Committee for Indian Carbon Market (NSC-ICM): gives policy oversight, recommends sector targets, and approves credit issuance.
- Bureau of Energy Efficiency (BEE): the market administrator. Develops sectoral targets and methodologies, issues CCCs, and accredits verification agencies.
- Grid Controller of India (GCI): runs the registry, recording every CCC’s issuance, transfer, ownership, and retirement.
- Central Electricity Regulatory Commission (CERC): regulates trading and oversees the market through IEX and PXIL.
Simple way to remember it: NSC-ICM sets policy direction, BEE administers the market, GCI keeps the ledger, and CERC watches the trading floor.
Project Eligibility: What It Takes to Register an Offset Project
Not every green initiative automatically qualifies for carbon credits. To register a project under the Offset Mechanism, a developer needs to:
- Establish a baseline scenario: Show what would have happened without the project (“business as usual”).
- Demonstrate additionality: Prove the emission cuts wouldn’t have happened without the incentive of earning CCCs.
- Quantify expected reductions: Calculate anticipated emission cuts using an approved methodology.
- Build a monitoring plan: Covering data collection, measurement, calibration, quality checks, and record-keeping.
- Run stakeholder consultations: Assess environmental and social impact, in line with sustainable development requirements.
Projects can involve emission reduction, avoidance, or removal — as long as they follow an approved methodology and meet all registration, validation, monitoring, and verification rules.
Step-by-Step Process To Register & Earn Carbon Credits
Whether you’re a small business, a farmer, or a project developer, the general process looks like this:
- Pick an eligible project: For example: energy efficiency upgrades, methane capture, industrial emission cuts, afforestation, regenerative agriculture, or even newer categories like end-of-life vehicle (ELV) material recovery and vehicle scrappage, which are currently under methodology development.
- Choose an approved method: Your project must follow a BEE-approved methodology.
- Prepare a Project Design Document (PDD): This sets your baseline and estimates expected emission cuts.
- Get it validated: An Accredited Carbon Verification Agency (ACVA) validates your PDD before registration.
- Register on the ICM Portal: Submit your validated PDD to BEE for review.
- Run and monitor the project: Follow your approved monitoring plan.
- Get verified: The same ACVA (or another accredited one) verifies your actual results after monitoring.
- Receive your CCCs: BEE credits certificates to your registry account — one CCC per verified tonne of CO2e.
- Trade or retire: Sell your CCCs on IEX or PXIL, or retire them yourself against a climate claim.
Who Is Eligible To Sell Carbon Credits?
Two kinds of participants can sell CCCs:
- Obligated entities: In the nine notified sectors, if they outperform their GHG intensity target. Their surplus CCCs can be sold to other obligated entities that fell short.
- Non-obligated project developers: MSMEs, startups, NGOs, farmers, or individual landowners, who register an eligible project under the Offset Mechanism, get it verified, and receive CCCs.
Either way, selling only becomes possible after a certificate is officially issued into your registry account by BEE. There’s no way to sell credits before verification, and once a certificate is retired against a compliance or climate claim, it can’t be resold.
Can I Get Carbon Credits For My Land?
Simply owning land doesn’t earn you carbon credits. You need to run an eligible project on that land, following an approved methodology, and get it verified. Common land-based project types in India include:
- Regenerative agriculture and soil carbon: Practices like zero-till farming and direct seeded rice (DSR), which cut water use, fertiliser use, and emissions.
- Afforestation and reforestation: Planting or restoring tree cover on eligible land.
- Agroforestry: Combining trees with crops or livestock.
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How Much Is One Ton of Carbon Credit Worth?
Pricing depends on which market you’re looking at:
| Market | Typical Price per Tonne | Notes |
| CCTS voluntary/offset market (India) | ₹200 to ₹400 (~USD 2-5) | Domestic, still developing |
| CCTS compliance market (India) | To be discovered via trading | Expected to start around October 2026, within a price floor and ceiling |
| Global voluntary market | USD 2 to USD 50 | Varies widely by project quality and type |
Quality matters a lot here. High-integrity, well-verified credits — like science-backed soil carbon projects — tend to command higher prices than basic offset credits. On the compliance side, trading will happen within a price collar (a floor and ceiling price) to keep prices stable and avoid the volatility that affected the older PAT market.
Who Is the Largest Buyer of Carbon Credits?
Globally, energy and technology companies dominate. In recent years, Shell has consistently been the single largest retirer of voluntary carbon credits, using tens of millions of tonnes annually, mostly through nature-based projects. Microsoft has typically ranked second, focused more on higher-quality, durable removal credits. Other major buyers include Meta, Amazon, Delta Air Lines, and several large financial and energy companies. Across the market, financial and energy sector buyers together account for the largest share of credits retired each year.
Within India’s CCTS specifically, the primary buyers are obligated entities that fall short of their GHG intensity targets — they’re required to purchase CCCs to cover the shortfall. Alongside them, Indian corporates with voluntary sustainability or net-zero commitments are increasingly buying credits — both CCTS-linked and international ones — to support ESG reporting and climate goals.
Market Credibility Safeguards
A carbon market is only as good as the trust behind its certificates. CCTS builds in several checks to keep things real, measurable, and traceable:
- Independent verification: every project is checked by a BEE-accredited Carbon Verification Agency (ACVA), separate from the developer.
- Unique serial numbers: every CCC gets one at issuance, and retired certificates can’t be transferred or resold.
- Strict methodology rules: additionality, baseline justification, and conservative emission calculations are all required.
- Ongoing monitoring: calibrated equipment, quality checks, and regular monitoring reports where applicable.
These safeguards are also what make CCCs usable in corporate ESG and sustainability reporting, not just for compliance.
CCTS vs PAT Scheme: What Changed?
| Feature | PAT Scheme (2012) | CCTS (2023) |
| Focus | Energy efficiency | Carbon emissions |
| Currency | Energy Saving Certificates | Carbon Credit Certificates |
| Legal basis | Energy Conservation Act, 2001 | Energy Conservation (Amendment) Act, 2022 |
| Coverage | 13 sectors | 9 sectors (currently) |
| Who can join | Mandatory only | Mandatory + Voluntary |
| Global link | Domestic only | Aligned with EU ETS and similar markets |
Why This Matters if You Export to Europe
If you sell to the EU, CCTS affects your bottom line too. Starting in 2026, the EU’s Carbon Border Adjustment Mechanism (CBAM) taxes imports based on carbon footprint. Without a domestic carbon price, Indian exporters would pay that tax straight to Europe. With CCTS, you can build a documented carbon price in India instead — which can help you avoid paying twice.
Common Mistakes Businesses Make
- Thinking it doesn’t apply to them: Many mid-sized manufacturers underestimate their energy use and miss deadlines.
- Skipping the offset mechanism: Small businesses assume carbon credits are only for big industry — and miss a real income source.
- Leaving paperwork for the last minute: PDDs and monitoring plans take time to prepare properly.
- Not budgeting for verification costs: Third-party ACVA verification is a real, recurring cost.
- Mixing up credit types: Credits from Verra or Gold Standard don’t automatically convert into CCTS credits — they run on separate systems.
What’s Next for CCTS?
- New methodologies: More project categories are being reviewed, including circular-economy activities like end-of-life vehicle (ELV) recovery and vehicle scrappage.
- Phase 2 expansion: Fugitive emissions, construction, solvent use, and carbon capture may be added to the offset mechanism, though there’s no official date yet.
- Thermal power’s status: It may eventually be brought under the compliance mechanism.
- Full trading rollout: Expected through FY 2026, once the first batch of credits is verified.
FAQs
No. It’s mandatory only for large entities in nine notified sectors like steel, cement, and aluminium. Others can join voluntarily through the offset mechanism.
Four bodies share the job: NSC-ICM sets policy and recommends targets, BEE administers the market and issues CCCs, GCI operates the registry, and CERC regulates trading through IEX and PXIL.
Obligated entities that beat their emission targets, and non-obligated project developers — including MSMEs, farmers, and landowners — whose registered projects have been verified and issued CCCs.
A project developer prepares a Project Design Document, gets it validated by an Accredited Carbon Verification Agency (ACVA), registers it with BEE, monitors the project as planned, and gets the results verified. Once verified, BEE issues CCCs straight into the developer’s registry account — one certificate per verified tonne of CO2e.
Nine energy-intensive sectors: aluminium, cement, chlor-alkali, fertiliser, iron and steel, pulp and paper, petrochemicals, petroleum refineries, and textiles.
CCTS is India’s own domestic scheme, with rules set by BEE, verification through ACVAs, and records kept on GCI’s registry. Voluntary international markets like Verra or Gold Standard run on separate rules, separate registries, and separate credit types — the two aren’t interchangeable.
Not yet, but they’re on the way. End-of-life vehicle (ELV) recovery and vehicle scrappage are being reviewed as new offset methodologies, and could become eligible once officially approved.
Not just for owning it. You need to run an eligible project — like afforestation or regenerative agriculture — following an approved methodology, and get it verified.
In India’s voluntary market, roughly ₹200 to ₹400. Globally, voluntary credit prices range from about USD 2 to USD 50, depending on project quality.
Globally, Shell and Microsoft are currently the top voluntary market buyers. Within CCTS, the main buyers are obligated entities that need to cover a shortfall against their targets.
It must buy CCCs to cover the shortfall, or pay a penalty equal to twice the average CCC price.
No, but it grew from it. PAT tracked energy efficiency; CCTS prices actual carbon emissions.
Yes, it can. A documented carbon price in India may help exporters avoid duplicate tax under the EU’s CBAM.
