India's Carbon Credit Trading Scheme — The Basics
The Carbon Credit Trading Scheme (CCTS) was notified by the Ministry of Power in June 2023 under the Energy Conservation (Amendment) Act 2022. It establishes the Indian Carbon Market (ICM), with the Bureau of Energy Efficiency (BEE) as the designated administrator and the Ministry of Power as the governing authority.
The scheme creates Indian Carbon Credits (ICCs), where one ICC = one tonne of CO₂ equivalent reduced, avoided, or sequestered. Credits are registered and tracked in a centralised carbon credit registry maintained by BEE. Trading occurs on designated exchanges — currently the Power Exchange of India (PXIL) and the Indian Energy Exchange (IEX).
Two Types of Participants Under CCTS
| Aspect | Obligated Entities | Voluntary Participants |
|---|---|---|
| Who they are | Large industrial units in designated energy-intensive sectors | Any entity not covered by the compliance track |
| Sectors covered | Aluminium, cement, chlor-alkali, fertilisers, iron & steel, petrochemicals, pulp & paper, textiles | All sectors — manufacturing, services, agriculture, real estate |
| Obligation | Must meet energy consumption norms set by BEE | No mandatory target — can choose to participate |
| Earning credits | Earn compliance credits by reducing consumption below assigned targets | Earn offset credits through emission-reduction projects |
| Using credits | Can sell surplus credits, or must purchase if falling short of targets | Can sell offset credits on the exchange to obligated entities or other buyers |
Projects Eligible for Carbon Credits
Voluntary participants can earn offset credits by undertaking the following types of projects, which must be registered with BEE and verified by an accredited Verification, Validation and Certification (VVC) body:
- Renewable energy generation: Solar power plants, wind energy, small hydro, biomass-based power generation. The credits represent the emission reduction compared to the grid emission factor.
- Energy efficiency improvements: Replacing energy-intensive equipment with efficient alternatives, industrial process improvements that reduce energy consumption per unit of output.
- Waste management: Methane capture from landfills, biogas from organic waste, composting facilities that divert waste from landfills.
- Afforestation and reforestation: Tree plantation on degraded lands, forest conservation projects with verified carbon sequestration.
- Sustainable agriculture: Reducing nitrous oxide emissions from fertiliser use, improved rice cultivation methods that reduce methane emissions.
- Industrial process improvements: Capturing and using waste gases, reducing fugitive emissions, substituting high-GWP refrigerants.
The Carbon Credit Registration Process
We assess whether your project activity qualifies under the applicable methodology approved by BEE. Different project types use different approved methodologies to calculate emission reductions. Eligibility depends on the project type, baseline emissions, and additionality (i.e., the emission reduction would not have occurred without the carbon credit incentive).
Prepare the Project Design Document (PDD) specifying the project boundary, baseline methodology, emission reduction calculation, monitoring plan, and expected credit volume. The PDD is the core document for BEE registration and VVC body validation.
An accredited Verification, Validation and Certification body reviews the PDD and validates the project's eligibility and emission reduction calculations. BEE maintains a list of accredited VVC bodies in India.
The validated project is submitted to BEE for formal registration in the Indian Carbon Market registry. Registration confirms the project's credit generation eligibility and assigns a unique project ID.
Once registered, you monitor actual emission reductions per the approved monitoring plan and submit monitoring reports to the VVC body for verification. Verified reductions are reported to BEE, which issues Indian Carbon Credits to your registry account.
Issued ICCs can be sold on the designated exchanges (PXIL or IEX), sold directly to obligated entities under bilateral agreements, or retired (permanently cancelled) against your own carbon neutrality claims.
Our Advisory Services
- Assessing your project's eligibility under CCTS and recommending the appropriate methodology
- Reviewing and advising on Project Design Documents from a legal and regulatory compliance perspective
- Drafting carbon credit purchase and sale agreements, including price fixation mechanisms, delivery timelines, credit quality representations, and default consequences
- Advising on cross-border voluntary carbon market participation (Verra/VCS, Gold Standard) for export-oriented businesses
- Structuring carbon credit portfolio management for obligated entities — acquisition strategy to meet compliance targets at minimum cost
Frequently Asked Questions
Yes. Small and medium businesses can participate as voluntary (offset credit) participants in the CCTS. If your business undertakes a qualifying project — such as installing rooftop solar, improving energy efficiency significantly, or undertaking afforestation — you can register the project with BEE, get the emission reductions verified, and earn Indian Carbon Credits. However, the registration and verification process involves documentation and third-party verification costs that may make very small projects economically unviable. Aggregating multiple small projects under a programme of activities (PoA) structure is one way to make smaller projects viable.
Compliance credits (also called performance credits in Indian regulation) are earned by obligated entities — large industrial units in designated sectors — when they reduce their energy consumption below the norm assigned by BEE under the Perform Achieve and Trade (PAT) scheme. Offset credits are earned by voluntary, non-obligated participants who undertake emission-reduction projects. Both types of credits are denominated in tCO₂e and can be traded on the ICM exchanges, but they originate from different tracks of the scheme and have different registration pathways.
Indian Carbon Credits are primarily a domestic instrument. The use of ICCs for international compliance obligations (such as CORSIA for aviation) or for export to foreign carbon markets is subject to India's cross-border trading rules, which are still being finalised. The CCTS notification mentions that procedures for international trading will be prescribed separately. For businesses targeting Verra (VCS) or Gold Standard credits that have established international market acceptance, those programmes can be pursued in parallel to or instead of the domestic CCTS registration, depending on your project's characteristics and target buyers.
Explore Your Carbon Credit Opportunities
Contact us to assess your project's eligibility and understand your options in India's Carbon Market.