GREEN THOUGHTS

As carbon pricing enters the policy mainstream, India must align climate ambition with industrial competitiveness and credible measurement systems

- PRATISHTHA KUMARI

Carbon Credit Trading Scheme creates a compliance carbon market where energy-intensive industries must meet emission-intensity targets

The Union Budget 2026-27 reinforced India's climate and industrial decarbonisation strategy, promoting cleaner production, technological innovation and a gradual shift toward low-carbon growth. A key highlight was the proposed Rs 20,000 crore support framework for Carbon Capture, Utilisation and Storage (CCUS) over five years, targeting hard-to-abate sectors such as steel, cement, refineries and chemicals. Budgetary allocations further strengthened the clean-energy ecosystem through continued support for the National Green Hydrogen Mission, renewable energy expansion (including wind and hydro), bioenergy programmes and green energy corridors. The expansion of the National Manufacturing Mission, including customs duty exemptions on 63 capital goods for lithium-ion battery production, aims to build domestic capacity in EV batteries and advanced clean technologies.

These fiscal measures complement the structural shift from regulatory compliance to market-based instruments. The role of carbon pricing is becoming increasingly central, and at the heart of this transition lies the Carbon Credit Trading Scheme (CCTS), India's most ambitious attempt to establish a domestic carbon market.

The CCTS, established under the Energy Conservation (Amendment) Act, 2022, introduces a market-based mechanism to help achieve India's target of reducing greenhouse gas (GHG) emission intensity by 45 per cent by 2030. It creates a national compliance carbon market built on emission-intensity reduction targets for energy-intensive industries.