Embed Indian Carbon Market in Global Trade Context

Amidst tariff trepidations, the Indian Carbon Market (ICM) is moving rapidly and surely.

- SANGEETA GODBOLE

The Ministry of Environment, Forest and Climate Change (MoEFCC) has notified draft targets for emissions intensity to obligated entities in four industrial sectors—Cement, Aluminum, Paper, and Chlor Alkali—on April 16, 2025. A 60-day period is available for comments on targets until June 14. Mirroring India's Nationally Determined Contributions (NDC) commitments, obligated entities are mandated to achieve a reduction in the emissions intensity of greenhouse gases (GHGs) rather than absolute emissions.

Emissions intensity vs absolute emissions
Emissions intensity is a smarter regulatory intervention and harder to achieve. The European experience in absolute emissions allowances demonstrates that, in some instances, emissions savings resulted from lower production. Installations reduced their production but used the emissions allowances they received to generate profits on the Emissions Trading System. By fixing binding targets of emissions intensity, the MoEFCC leaves no leeway. Whatever the production levels, GHG emissions intensities are mandated. Missing targets will entail stiff penalties on obligated entities.

The Indian carbon regulation has built on the industry-regulator experience in the Perform, Achieve, and Trade (PAT) scheme, which mandated energy efficiency targets for designated consumers. The PAT claims a reduction of carbon emissions by 105 million tonnes so far.

The PAT experience