India's 'carbon market' launches next year: What does it mean?
What's the story
India will launch its first carbon market by mid-2026, Power Minister Manohar Lal Khattar announced.
The Indian Carbon Market (ICM) initiative is part of the country's larger plan to cut emissions and reach a net-zero target by 2070.
The ICM will function as a market-based mechanism, motivating businesses and governments to cut greenhouse gas emissions by providing financial incentives for carbon reduction.
Launch preparations
Preparations underway for ICM's soft launch
Preparations for the ICM are underway, with a soft launch planned to test the market and iron out any issues.
Khattar expressed confidence that the Power Ministry would officially launch the Indian Carbon Market by mid-2026.
He made the announcement at Prakriti 2025, an International Conference on Carbon Markets that concluded on February 25.
Target sectors
Emission intensity targets for 9 sectors
Ahead of the ICM's launch, the Bureau of Energy Efficiencies (BEE) under the Power Ministry, will set emission intensity targets for nine sectors.
These are iron and steel, aluminum, chlor-alkali, cement, fertilizers, pulp and paper, petrochemicals, petroleum refineries, and textiles.
The BEE is formulating a sector-specific greenhouse gas emissions intensity trajectory up to 2030 for each sector according to India's Nationally Determined Contribution commitments under the Paris Agreement.
Implementation strategy
Staggered implementation of emission reduction targets
Akash Tripathi, the Additional Secretary in the Power Ministry, said that the emission reduction targets would be implemented in a staggered manner as sectors have different technological capabilities and costs.
Some sectors may be mandated to meet 40% of their target by 2027, with the rest to be fulfilled by 2030.
This would benefit sectors still moving toward more efficient emission reduction technologies.
Regulatory framework
ICM's regulatory framework and trading mechanisms
The ICM is a government-created framework to regulate, trade, and incentivize carbon emissions reductions.
In July 2024, the government adopted detailed regulations under the Carbon Credit Trading Scheme (CCTS).
The CCTS has two mechanisms: compliance and offset.
Under the compliance mechanism, entities must comply with emission norms in every compliance cycle of CCTS while those reducing emissions below the set intensity are eligible for carbon credit certificates.